MGVCL

BUSINESS PLAN FOR MYT SECOND CONTROL PERIOD FY 2011-12 TO 2015-16
Madhya Gujarat Vij Company Ltd. Vadodara, Gujarat
An ISO 9001:2008 Company
Business Plan for MYT Control period FY 2011-12 to 2015-16
MGVCL
EXECUTIVE SUMMARY
MGVCL is company registered under the Companies Act 1956, with the objectives of distribution of electricity in the northern parts of the State of Gujarat. The Commission is in the process of formulation of revised Multi Year Tariff Regulations for the Control Period from FY 2011-12 to FY 2015-16, and as part of that process has directed MGVCL to submit a Business Plan which would cover the Strategic and Operational Plan for the Company. MGVCL has prepared the Business Plan taking cognisance of the existing internal factors and external business environment affecting the business. It is submitted that the Business plan being a dynamic document may need to be updated at periodic intervals taking into account the changes in the internal and external environment and these changes would be intimated to the Honble Commission from time to time.
1.
Introduction The Business Plan is initiated based on a review of what is on the Companys current operations, operational performance and organisation structure. The formulation of strategies is driven by the consideration of the vision, mission and values that the Company holds and cherishes. The existing profile of the Company, its strengths and weaknesses, its policies, and the emerging legal and business environment plays an important role in the formulation of the plan. The approach and methodology adopted for preparation of Business plan of MGVCL is as follows: The business plan is prepared for the projection period FY 2012 to FY 2016. The assumptions like investment plan, load forecast, loss reduction plan, power procurement plan etc. are maintained as provided in MYT petition for second control period FY 2011-12 to 2015-16
2.
Objective of Business Plan As per the Forum of Regulators recommendation Distribution licensees should submit the business plan and power purchase plan, for approval of the Commission, at least six months prior to submission of MYT petitions. Also as directed by the Hon'ble commission Business Plan for the second Control Period is to be filed along with the MYT filings for the second Control Period. MGVCL has developed a comprehensive business plan for the company for the period FY 2011-12 to FY 2015-
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16. The business plan in following sections intends to cover the above issues from the strategic, competitive, financial, commercial and organisational perspectives. 3. Company Profile Madhya Gujarat Vij Company Limited (MGVCL) is given the responsibility of distribution of electricity in the Central parts of the State of Gujarat. MVCL operates through the network spread over 24000 Sq Kms covering five full districts viz., Kheda, Panchmahal, Dahod, Anand and Vadodara. MGVCL obtained its Certificate of Commencement of Business in the FY 2003-04; however, the company could not commence its operations during the financial year ended 31st March 2004 and 31st March, 2005. The Company has started commercial function w.e.f. 1st April 2005. 4. Vision and Mission of MGVCL Based on the changing environment, both internal and external, MGVCL has framed its Vision and Mission and tried to align it with its future Business Plan. MGVCL hopes to achieve its goals and take advantage of the opportunities available in the Power sector. MGVCLs Vision is Customer satisfaction through service excellence MGVCLs Mission is To provide reliable and quality power at competitive cost To reach global standards in reducing distribution losses The Core Values of MGVCL being: Customer satisfaction Pride of belongingness Excellence Participative work culture Being ethically and socially responsive 5. Category Wise Consumers and Sales Following Table shows the category wise No of Consumers and Sales for the FY 200910:
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Category wise Consumer & Sales (FY 2009-10) Number of Consumers 2064337 232418 25714 8112 66965 6049 1186 6 2404787 %age of Consumer 85.84% 9.66% 1.07% 0.34% 2.78% 0.25% 0.05% 0.00% 100.00% %age of Sales 24.81% 8.83% 8.20% 2.52% 15.79% 1.03% 32.61% 6.22% 100.00%
Category Residential Commercial Industrial LT PWW Agriculture Street Light Industrial HT Railway Total
Sales 1428 508 472 145 909 59 1877 358 5756
MGVCL has a consumer base of 25 lacs, Residential category consists of the largest consumer base followed by Commercial & then Agriculture. Both these categories are subsidised and hence affect the revenue of the MGVCL. The industrial consumption is around 40% which is beneficial for MGVCL and 16% is agriculture consumption which can be considered as a cause of concern. 6. IT Initiatives MGVCL has undertaken many initiatives to become the IT enable power Distribution Company which is the need of the hour at present. The activities which have been implemented are as follows: E- Urja an ERP solution is being implemented as an end to end ERP solution whereby several processes will be computerised. E-Gram Panchayats, (E-GPs) whereby 2809 E-GPs under 5 districts has been assigned as the agency for collection of energy bills. SCADA, GIS, GPS, Consumer Indexing, IVRS Consumer Call Centre have been implemented, showcasing MGVCLs initiatives in latest technology. There is also E-Payment facility from anywhere across the world. 7. Human Resource Department The Company has taken series of proactive HR initiatives including need based training and development programmes with special emphasis on developing competencies of employees and thereby enhancing organizational effectiveness. Currently, HR department consist of HR Department of AGM, DGM and P.O who undertakes all the activities related to HR Function.
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MGVCLs HR Management System in association with GETRI has organized many need based training & development programs along with contribution in areas of quality, customer relations (SAMPARK) and energy conservations. HR Department has also taken lead as far as getting of ISO certification for MGVCL thereby contributing towards quality improvement. Having the total number of employees around 6208, around 58% of the employees are technical. 8. Corporate Social Responsibility Under Corporate Social Responsibility, MGVCL has adopted Chhota-udepur Industrial Training Centre (ITI) for upgradation under Public private partnership scheme of Central Government. MGVCL being responsible distribution utility aims to fulfil its social responsibilities towards the citizens of the State of Gujarat. Energy Conservation Measures MGVCL has undertaken various Energy Conservation activities such as spreading energy awareness amongst the consumers through publicity, celebrating energy conservation week & Urja-Shakti Month, purchase of energy efficient transformers, implementing energy audit programs & reduction of technical losses. MGVCL is also planning to develop a solar park in Baroda. Consumer Service The basic objective of the Company is to serve the consumers and provide the quality power supply. To achieve the objective, MGVCL has undertaken many consumer service related activities which includes 24x7 customer care call centre which is an IVRS and leverages GIS data for better consumer service. Any Time Payment (ATP) machine which is a touch screen multimedia based system has been installed to facilitate consumers to pay their energy bills at any time. Mobile Van has been started in some sub-division to collect energy bill from consumers door step. Hand Held Equipments for meter reading & billing have been in use in some areas. The company has launched the E-payment facility in June, 2010 so as to enable the consumers to make payment through internet Other Activities Page IV
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Other Activities carried out by MGVCL are: DRUM Project, RMU - concept of Ring Distribution, RAPDRP, RGGVY, Rural Electrification schemes, Implementation of remote access metering to HT consumers, Testing of High Quality Meters, implementation of advanced technology GIS, SCADA etc. 12. Major Achievement In past five years, MGVCL has achieved many milestones and has been recognised all over India as one of the efficient distribution company. Major Achievement of MGVCL is to get award & recognition at national level for excellence in operations, execution of projects, and innovation in designs & distribution in urban & rural areas. MGVCL is the only Discom to receive NABL accreditation for Testing and Calibration for its High Tech Meter Testing Laboratory at Vadodara. MGVCL is the 1st Government owned Discom to be ISO Certified. MGVCL got the patent for improved single phase power system popularly known as Specially Designed Transformer (SDT). Operational Performance Analysis A comparative analysis of the operational performance of past years in relation to Sales, T&D Loss, Reliability indices, DTR failure rate, etc is discussed here. In spite of the fact that MGVCL is inherited with an old distribution infrastructure from the erstwhile GEB, MGVCL is making all out efforts to improve / sustain the performance as well as to supply quality power to the consumers. The Demand-Supply for electricity in MGVCL has increased manifold; despite significant overall progress in the power sector, there had been a significant gap between demand and supply. In FY 2009-10, the Peak deficit seemed to reduce considerably to 8% from a level of 30% in FY 2007-08. Various practices regarding distribution loss reduction adopted by the utility has made it possible to achieve a low distribution loss level of around 13% in FY 2009-10 from distribution loss level of 21% in 2005-06 which is very efficient compare to other State Utilities who have a distribution loss of around 30%. In FY 2009-10 the losses increased due to poor monsoons which lead to higher supply to the agricultural category.
Past 5 Years Distribution Loss
13.
Distribution Loss
FY 06-07 14.85%
FY 07-08 13.90%
FY 08-09 12.98%
FY 09-10 13.08%
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Power Purchase cost: The Power Purchase cost has been showing an increasing trend in last five years, however there was a decrease in the power purchase cost per unit in FY 09-10 due to reduction in gas prices which were too high in FY 0809.
Past 5 Years Power purchase cost
Particulars Units Purchased (MUs) Value (Rs Crs) Per Unit Cost (Rs/Unit)
2005-06 5457 134199 2.46
2006-07 5612 151593 2.70
2007-08 6133 171815 2.80
2008-09 6678 225354 3.37
2009-10 7226 228712 3.17
The total amount of agricultural subsidy released each year by GoG is capped at Rs 1100 Cr. It is allocated to each Discom in proportion to its respective percentage share in agricultural consumption to compensate for the revenue loss due to subsidized category of consumers as well as for unmetered consumption. The reliability of the distribution system on the basis of number and duration of sustained interruptions in a year, using the indices such as SAIFI, SAIDI & MAIFI indicates that during the FY 2009-10 due to poor monsoons & climatic conditions the systems reliability was effected.
Past 3 Years System Reliability Indices
Reliability Indices SAIFI SAIDI MAIFI
FY 2007-08 3.29 16 15.71
FY 2008-09 FY 2009-10 2.59 3.35 18.75 23.67 17.15 22.82
There is a significant reduction in the distribution transformer failure rate over the last 5 years and it has reduced to 5.06% for the year 2009-10. This is mainly due to vigorous transformer maintenance, providing breezer & lightning arrestor & maintenance of LT lines.
Past 5 years DTR Failure Rate
Particulars 2006-07 Transformer Failure Rate 9.60%
2007-08 2008-09 2009-10* 9.68% 6.11% 5.06%
Employee expense is around 8.6% of the total revenue earned and is Rs 0.41/unit sold. The high cost is due to the large number of employees who since April 2011
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restructuring are at MGVCL. Revenue realized from sale of power is slowly coming closer to the average cost of supply. For FY 2009-10, revenue realized from sale of power has increased to 95% of the average cost of supply from 91% in FY 2005-06.
Revenue realized Vs Average Cost of Supply
Revenue Realized Cost of Supply
2005-06 3.48 3.82
2006-07 3.79 4.10
2007-08 3.87 4.26
2008-09 4.57 4.83
2009-10 4.51 4.76
Under Demand Side Management (DSM) measures MGVCL has taken tremendous and remarkable steps to reduce energy consumption by increasing end use efficiency. Sine 1-06-05 with the setting of ALDC, the pattern of load demand is studied hourly, daily and on monthly basis to examine the type of load and its effect on MGVCL system. MGVCL has replaced all tube lights in its all offices from conventional choke tube light to T5 energy conservation tube lights. MGVCL has also planned a pilot project of installing roof type solar powers in its five sub-division offices, thereby reducing its own usage of electricity. Also, Co Incidental Peak Load has been reduced by providing different time slots to Agricultural Consumption by doing regrouping. Power Factor Correction measures have been undertaken which have reduced the current in the system & hence reduced technical losses. 14. Financial Performance Analysis After analysis of the revenue statement and the Balance Sheet of the MGVCL, it can be analysed that the dependence on the government subsidy as well as the income from other sources has been decreasing and revenue from tariff is increasing at a 5 year CAGR of 16%. Though there is a major increase in Employee expenses due to sixth pay commission & also an increase in other miscellaneous expenses, there has been a profit due to power purchase cost under control due to steps undertaken by GUVNL. The fixed Assets and CWIP has been increasing by 19% and 5% respectively due to frequent augmentation and expansion of distribution system to cater the load growth in the area. The CAPEX plan undertaken includes re-enforcement of the system to provide quality, security and availability of power supply to the consumers, to undertake system development to meet the load growth, achieving the targeted reduction in system losses, undertake automation and other improvement works to enhance customer service.
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Also, the debt : Equity ratio of 0.52 is considered to be in favourable position due to low gearing ratio and therefore is having a sound financial position to get additional fund to carry out their additional CAPEX. However, the Current Asset Ratio is lower than 2:1 which is considered to be efficient industry standard ratio as such. This is due to increase in current liabilities compare to current asset affecting the working capital of the company. This indicates that liquidity position of the company needs to be improved to meet the quick liquidity requirement to meet the operation of the business. Also the summary of the CAPEX planned by the Company for FY 2009-10 is as outlined below:
Summary of CAPEX for FY 2009-10
Schemes Distribution Schemes Rural Electrification Scheme Non Plan Schemes Others Schemes New Innovative Schemes Capital Expenditure Total
FY 2009-10 50 117 18 7 59 251
15.
Power Sector Scenario The Indian economy has been witnessing more than 9% growth rate in last three years resulting in major dependent on power to carry out the activities related to production and service affecting the economy. The developing economy has resulted into increase in demand of power whereas the capacity available within the country is not suffice enough to meet such demand resulting into peak and energy deficit. The growth in demand of electricity and National plan to have a per capita consumption of 1000 units, Indian government has set ambitious goals in the 11th plan to add around 100,000 MW capacities. However, the Western region accounts for ~32% of the total generation in the country and also has the highest deficit in the country. The Western region is facing a shortage of nearly 18% in FY 2009-10. The region wise demand supply scenario is shown below:
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Region-wise Demand Supply Gap in India Energy Requirement (MU) 254231 258528 220576 87927 9332 830594
Regions North West South East N. East All India
% deficit 12% 14% 6% 4% 11% 10%
Peak Demand (MW) 37159 39609 32178 13220 1760 123926
% deficit 15% 18% 10% 6% 18% 13%
Source: CEA report on Monthly power supply position
In the past, there has been a consistent gap in the peak demand and peak met as well as in energy terms in the State. Considering the performance in past few years, Gujarat Power Sector has improved a lot with no energy deficit within the State and having a per capital consumption of more than 1000 units which is the target of Indian Government to achieve it by 2012 for India as a whole. The following table shows the actual power supply situation in the state for the past few years.
Power Supply situation FY 2003-10 Peak Deficit / Surplus (MW) -1305 -2616 -2584 -2173 -3509 -3234 -2881 -891 Peak Deficit / Surplus (%) -15.1 -26.6 -25.4 -22.2 -30.2 -26.7 -24.3 -8.6 Energy Deficit / Surplus (MU) -6859 -6879 -6957 -4701 -8381 -11133 -6631 -3,149 Energy Deficit / Surplus (%) -11.4 -12 -11.7 -8.2 -13.4 -16.2 -9.8 -4.5
Period 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Peak Demand (MW) 8641 9820 10162 9783 11619 12119 11841 10,406
Peak Met (MW) 7336 7204 7578 7610 8110 8885 8960 9,515
Energy Requirement (MU) 60175 57171 59681 57137 62464 68747 67516 70,412
Energy Availability (MU) 53316 50292 52724 52436 54083 57614 60885 67,263
The negligible deficit in the State will be eliminated within the immediate future by contracting the additional capacity for the Company by GUVNL. 16. Regulatory Framework National Level: The implementation of the Electricity Act, 2003 (EA 2003) has effected considerable changes the electricity market. The major changes relevant to working of a distribution company are as under:
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Delicensing of generation; Thrust to complete the rural electrification and provide for management of rural distribution by Panchayats, Cooperative Societies, non-Government organizations, franchisees etc Provision for license free generation and distribution in the rural areas; Introduction of open access in transmission and distribution; Introduction of parallel license exclusivity of distribution license removed; SERC is a mandatory requirement ; Provision for payment of subsidy through budget by State Government; Issues concerning theft and losses in the system;
The provisions of the EA2003 mentioned above, have far reaching implications for the power sector. It is evident from the above provisions that the EA2003 intends to create a competitive power sector in the long term and has left no choice for the state utilities but to improve their performance to face the competition from other players entering into the market. Also, in line with Electricity Act 2003, the National Electricity Policy outlines a plan for rural electrification, increased generation capacity, generation mix to be adopted for clean environment, improvement in grid for better transmission and distribution of power. India also seeks to create a more competitive energy sector to increase private sector participation. Finally, the Policy emphasizes the need for conservation and demand-side management including a national awareness campaign. In line with the above policy, the distribution company has to undertake activities to be more competitive as well as to abide by the policy guidelines. The policy aims at improving efficiency, financial availability of the sector, availability of power and protection of customer interest. Also, the National Tariff Policy deals with various parameters with respect to the fixation of tariffs, like providing adequate return on investment to the power generator and supplier and ensuring reasonable user charges for the consumers. It provides uniform guidelines to the SERC for the fixation of tariffs for their respective entities. The policy states that the distribution licensee should, in future, procure power solely through competitive bidding which as per the recent guidelines from Ministry of Power will be in effect from 5 th January 2011. At the National level, many initiatives have been considered by MoP, GoI and CERC
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with a view to develop the power sector. The initiatives described in the report are as follows: Rural Electrification Policy, 2006 R-APDRP (Restructured Accelerated Power Development & Reform Program) Renewable Purchase obligation with Renewable Energy Certificate Mechanism National Action Plan for Climate Change (NAPCC) National Solar Mission National Mission for Enhanced Energy Efficiency State Level The regulatory framework in the State of Gujarat is well established. The Gujarat Electricity Regulatory Commission (GERC) has already defined most of the regulations and is monitoring performance with a positive approach of improving efficiency and overall development of the sector. Multi-year tariff principles have already been implemented in the State. Benchmark-based performance monitoring has become the practice. Current Regulations relevant to MGVCL are as follows: 17. Terms and Conditions of Tariff Regulations, 2005 Standards of Performance of Distribution Licensee Regulations, 2005 Procurement of Energy from Renewable sources Regulation Power System Management Standards, 2005 Distribution Intra-State ABT implementation Provisions of Intra State Open access regulations Licensees Power to Recover Expenditure incurred in providing Supply and other Miscellaneous Charges (First Amendment) Regulations, 2010 Different Orders on determination of tariff for renewable sources of energy Designating State Nodal Agency for REC Regulations
Market Issues and Challenges The power distribution business environment would throw up a number of marketrelated issues and challenges which needs to be evaluated by MGVCL. Some of these issues and challenges are as follows: Open Access Regulation mandated to provide non-discriminatory open access which may result in loss of subsidising consumers;
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Parallel License As per the Act, a parallel licensee is possible to be operated whereby two licensees are supplying power in the same specified area. Currently, due to recent clarification from MoP and Ministry of Commerce, SEZ became the Distribution Licensee for the SEZ area whereby Discom is supplying power. Also, other companies may get an approval of being a distribution licensee to supply power in the specified area of MGVCL which is more prevalent in urban areas due to low losses and are marked by the non-existence of agriculture consumers. ABT implementation UI at intra-state level due to deviation in schedule and actual will make each DISCOM accountable. A proper planning and scheduling of power alongwith implementation of SCADA is required to have efficient distribution system; Regulatory provisions Being into a regulated environment, have to follow the regulatory framework and directions by the appropriate commission. Industry Risk and Competition A competition from the other private sector player due to opening of power sector will result into a risk of losing of subsiding consumers. Renewable Power Purchase Obligation SERC mandates the distribution licensee to purchase of electricity from renewable sources, a percentage of the total consumption of electricity in the area of a distribution licensee. This step is considered to promote the generation from such renewable sources and can have a minimum impact on the environment. Impact of DSM measures - Demand Side Management (DSM) is described as the planning, implementation and monitoring of utilities activities designed to encourage customers to amend their electricity consumption patterns, both with respect to timing and level of electricity demand so as to help the customers to use electricity more efficiently. Every Distribution Licensee has to implement the DSM measures as an integral part of their day-to-day operations. Many SERCs and Discoms have already introduced some DSM programs. Experience suggests that the skills of discom staff, and the priority accorded to it by discom management, are important for its success. DSM incentives need to be carefully designed and targeted so that the appropriate load curve changes are realized. Universal Service Obligation MGVCL is obliged to supply power to each consumer under USO. New connections to remote areas are expensive and maintaining reliable supply levels are difficult. These features tend to increase technical losses and the costs of O&M.
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Power Purchase Responsibility To meet RPO and get a low cost power, MGVCL may go for direct procurement of power from the generator. Market Penetration and Service Area - The widespread distribution network and the retail reach of such infrastructure would be key discriminators of a licensees market position. Cost to Serve against realisation The tariff of the consumers needs to progressively move towards the cost of supply of electricity and reduces the cross subsidies within the category of consumers. This has to be achieved by all the Distribution Utilities in India which is considered to be a major challenge for SERC and Utilities. Rationalisation of Tariffs to retain HT and Large consumers Currently, the Tariff is calculated based on cost of the supply at consumer end, the capacity of the consumer to pay and the socio economic policy of the government. The rationalization of tariffs is required simplify the structure and introducing cost reflective tariff by way of retaining the high end customers.
Understanding these core issues & risks of the power sector help in identifying the opportunities that lie ahead 18. SWOT Analysis Before outlining the Business Plan for any company, it is very important for the organisation to introspect to identify its strength and weaknesses and assess the external environment to outline opportunities and threats. Accordingly, it is very important to evaluate the environment both internal and external while charting out its growth path and the same has been outlined below.
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SWOT Analysis
Helpful In achieving the objective STRENGTHS Experienced Manpower Wide Spread Network Operation efficiency DSM Measures Novel Initiatives Uninterruptible quality power supply Branding of MGVCL by MoP OPPORTUNITIES Distribution Franchisee in Rural areas/ other states Contracting Power supply New business Opportunities CDM benefits Ancillary Services Eliminating Peak Deficit Joint Ventures Competitive Bidding Non-conventional energy Harmful In achieving the objective WEAKNESSES Commercial Arrangement Treatment of agricultural subsidy IrrationalTariff structure Ageing Distribution Infrastructure Ageing Employees
Internal Origin Attributes of the Organisation
19.
Risk Analysis It is necessary to understand that how the risks are perceived by the business. Virtually all organisations strive to survive. They strive to create value for their stakeholders including State Government, SERC, Consumers, Financial institutions, etc. The risk can be identified as a financial risk, regulatory risk, operating risk, technology risk, etc. Improve Efficiency: In order to be competitive on the distribution segment, MGVCL has to improve operational efficiency. The efficiency can be achieved through reduction of losses, quality power supply and upgradation of network. Improvement in Consumer Services: Due to inclusion of Open Access and Parallel License under the amended Electricity Act 2003, a consumer of MGVCL will always have a choice to avail supply of electricity from any other Distribution licences other than MGVCL in case of proper service, continuous power supply or cheap power. Therefore, a constant improvement in Consumer service will be required to avoid chances of losing the consumers. Project Management and Execution: A key element of the implementation of infrastructure plan is to execute project on a timely manner and is managed in a judicious way. To meet the investment objectives & improving the existing infrastructure of Distribution System, MGVCL needs to review the timely
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External Origin Attributes of the Environment
THREATS Non Discriminatory Open Access Regulatory Risk & inconsistencies Deemed distribution licensee provision to SEZ area Parallel licensee Sensitivity to operational variations Railway Consumer to tie up with NTPC Locked in long term PPAs based on market projections
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implementation and completion of Infrastructure plan. Recovery of Arrears: Even though MGVCL has a collection efficiency of 100%, still there are some arrears which need to be targeted and collected. Regulatory awareness: Regulatory risks will have to proactively deal with to minimise the impact on Company as well as Consumer Interest and therefore a capacity building is required to provide training to the employees for creating awareness related to regulatory provisions. 20. Future Business Opportunities While the SWOT analysis has revealed a number of opportunities, MGVCL may be targeting some of the opportunities in the near future. The key opportunities which could be targeted are: Joint Ventures / Public Private Partnership Non Conventional Energy Providing Ancillary Services to other power sector players Distribution Franchisee route Technical Consultancy
To avail opportunities for the future, MGVCL has to rapidly ramp up its existing technical staff to meet the objectives and gain advantage from the business opportunities. The Discom is making arrangements for Training of the existing staff to undertake future responsibilities as well. Organization Development & Institutional Strengthening hence has to be the key focus areas. Apart from Human Resources Development, MGVCL has to focus on the Environment related aspects to adhere to pollution control norms. However, the key aspect would be being operationally efficient to be able to match the efficiencies of private sector players. Commercial efficiency would be the focus. Thus, the short term outlook for MGVCL would be primarily to focus on improvement of its operational performance and have a efficient consumer. With the additional generation capacity being planned in the system, MGVCL can look at fulfilling the ever growing demand for the State. Also, while MGVCL has started looking at diversification by considering renewable energy, ancillary services, etc, this could be looked at contributing in a significant manner in the future business of the Discom. MGVCL has prepared the Business / Operational Plan taking cognisance of the existing internal factors and external business environment affecting the business. April 2011 Page XV
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It is submitted that the Business plan being a dynamic document may need to be updated at periodic intervals taking into account the changes in the internal and external environment and these changes would be intimated to the Honble Commission from time to time. 21. OPERATIONAL PLAN The operational plan includes the estimate of each cost of MGVCL for the second control period (from FY 2011-12 to FY 2015-16) and is in line with the MYT petition. The costs are estimated based on certain assumptions, past trend and extrapolated for future period. Sales Projections: It has been observed from past experience that the historical trend method has proved to be a reasonably accurate and well accepted method for estimating the load, number of consumers and energy consumption. In light of the above, MGVCL has estimated the above for various customer categories primarily based on the CAGR trends during past years. Following table shows the 5 year as well as 3 year CAGR for the category wise sales:
CAGR of Sales
Sales (MU) Low Tension Consumers Residential Commercial Industrial LT Public Water Works Agriculture Street Light LT Total High Tension Consumers Industrial HT Railway Traction HT Total TOTAL 5 years CAGR 3 years CAGR FY 10 over 06 FY 10 over 08 10.07% 13.14% 7.23% 9.19% 5.17% 6.42% 8.60% 9.06% 7.71% 8.83% 8.69% 9.78% 11.72% 4.53% 10.39% 10.38% 5.51% 9.40% 7.71% 8.34% 7.81% 8.77% FY 10 over FY 09 8.5% 9.7% 5.8% 9.0% 11.3% 3.5% 8.9% 2.1% 8.8% 3.1% 6.6%
Considering the above growth rates annually the category wise sales have been projected as shown on the following table:
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Sales Projection FY 2011-12 to 2015-16
Sales (MU) Low Tension Consumers Residential Commercial Industrial LT Public Water Works Agriculture Agriculture - Metered Street Light LT Total High Tension Consumers Industrial HT Railway Traction HT Total TOTAL FY10-11 10.07% 13.14% 7.23% 9.19% 0.00% 6.42% 8.60% 9.06% 7.71% 8.83% 8.69% FY11-12 10.07% 13.14% 7.23% 9.19% 0.00% 6.42% 8.60% 9.06% 7.71% 8.83% 8.69% FY12-13 10.07% 13.14% 7.23% 9.19% 0.00% 6.42% 8.60% 9.06% 7.71% 8.83% 8.69% FY13-14 10.07% 13.14% 7.23% 9.19% 0.00% 6.42% 8.60% 9.06% 7.71% 8.83% 8.69% FY14-15 10.07% 13.14% 7.23% 9.19% 0.00% 6.42% 8.60% 9.06% 7.71% 8.83% 8.69% FY15-16 10.07% 13.14% 7.23% 9.19% 0.00% 6.42% 8.60% 9.06% 7.71% 8.83% 8.69%
Distribution Losses The company has achieved a significant reduction in distribution losses, during recent years. However, loss reduction is a slow process and becomes increasingly difficult as the loss levels come down. Projection of distribution losses for second control period FY 2011-12 to 2015-16 are as shown below:
Distribution Loss Level FY 2011-12 to 2015-16
Particulars Distribution Loss FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 (Projected) (Projected) (Projected) (Projected) 12.75% 12.50% 12.25% 12.00% FY 2015-16 (Projected) 12.00%
Energy Balance The energy requirement for MGVCL will be met by supply from GUVNL. Based on the sales and distribution provided above, Energy Balance of MGVCL for the second control period FY12-FY16 is as shown below:
Energy Balance FY 2011-12 to 2015-16
S.No. 1 2 3 4 5 6 7 Energy Sales Distribution Losses Energy Requirement Transmission Losses Total Energy to be input to Transmission System Pooled Losses in PGCIL System Total Energy Requirement Particulars Unit MUs MUs % MUs MUs % MUs MUs MUs FY 2011-12 (Projected) 7,235 1,057 12.75% 8,292 386 4.45% 8,678 109 8,787 FY 2012-13 (Projected) 7,885 1,126 12.50% 9,011 415 4.40% 9,426 157 9,583 FY 2013-14 (Projected) 8,592 1,200 12.25% 9,792 445 4.35% 10,237 211 10,448 FY 2014-15 FY 2015-16 (Projected) (Projected) 9,363 10,204 1,277 1,391 12.00% 12.00% 10,640 11,595 478 521 4.30% 4.30% 11,118 245 11,363 12,116 267 12,383
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Total Power Purchase Cost The total power purchase cost for GUVNL for the second control period FY 201112 to 2015-16 comes to the power purchase cost through merit order transmission charges, GUVNL charges and SLDC Fees & charges, as shown below:
Power Purchase Cost FY 2011-12 to 2015-16
Year FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 Discom Discom Total Power Trading Profit & Total Trading Trading Fixed Fixed Cost Variable Cost Purchase Cost Variable Cost Trading Margin Revenue (Rs Cost (Rs Cr) (Rs Crs) (Rs Crs) (Rs Crs) (Rs Crs) (Rs Crs) Crs) 8,125 11,126 12,473 13,902 18,356 11,348 11,793 13,233 13,850 13,702 19,473 22,919 25,705 27,752 32,059 798 1,203 1,451 1,713 2,358 1,115 1,275 1,540 1,706 1,760 600 700 800 900 1,000 2,513 3,177 3,791 4,319 5,119 Net Cost (Rs Crs) 18,075 21,016 23,454 25,139 28,700
Aggregate Revenue Requirement The Aggregate Revenue Requirement for FY 2011-12 has been determined as Rs. 3,523 Crores. The Table below shows projection of Aggregate Revenue Requirement by MGVCL under MYT second control period FY 2011-12 to 201516.
ARR FY 2011-12 to 2015-16
Sr. No. 1 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3 4 5 6 7 8 9 10 11 12 Particulars Cost of Power Purchase Operation & Maintenance Expenses Empl oyee Cost Repair & Mai ntenance Admi nistration & General Charges Other Debits Extraordinary Items Net Pri or Period Expenses / (Income) Other Expenses Capitalised Depreciation Interest & Finance Charges Interest on Working Capital Provi sion for Bad Debts Sub-Total [1 to 6] Return on Equi ty Provi sion for Tax / Tax Paid Total Expenditure (7 to 9) Less: Non-Tariff Income Aggregate Revenue Requirement (10 - 11) FY 2011-12 (Projected) 3,047 269 222 40 39 7 0 15 (54) 121 51 40 6 3,533 71 6 3,610 87 3,523 FY 2012-13 (Projected) 3,594 284 234 42 41 8 0 16 (57) 134 44 47 6 4,109 74 6 4,189 87 4,102 FY 2013-14 (Projected) 4,084 301 248 45 43 8 0 17 (61) 147 35 53 7 4,626 78 6 4,709 87 4,623 FY 2014-15 (Projected) 4,468 318 262 47 46 9 0 18 (64) 159 24 57 7 5,033 81 6 5,120 87 5,033 Rs in Crores FY 2015-16 (Projected) 5,155 336 277 50 48 9 0 19 (68) 170 10 65 8 5,745 83 6 5,834 87 5,747
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INDEX
1. INTRODUCTION .............................................................................................................................................. 1 1.1 1.2 1.3 1.4 2. BACKGROUND ............................................................................................................................................ 1 BUSINESS ACTIVITIES ................................................................................................................................... 2 OBJECTIVE OF THE BUSINESS PLAN ................................................................................................................. 2 APPROACH TO THE BUSINESS PLAN ................................................................................................................. 3
MGVCL PROFILE.............................................................................................................................................. 6 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 BACKGROUND ............................................................................................................................................ 6 VISION AND MISSION OF MGVCL.................................................................................................................. 7 OPERATING STRUCTURE OF MGVCL .............................................................................................................. 8 CATEGORY WISE NUMBER OF CONSUMERS ..................................................................................................... 11 IT INITIATIVES........................................................................................................................................... 11 HUMAN RESOURCE MANAGEMENT .............................................................................................................. 12 CORPORATE SOCIAL RESPONSIBILITY............................................................................................................. 17 ENERGY CONSERVATION MEASURES ............................................................................................................. 17 ACTIVITIES RELATED TO CONSUMER SERVICE .................................................................................................. 19 OTHER ACTIVITIES CARRIED OUT BY MGVCL.................................................................................................. 21 MAJOR ACHIEVEMENTS OF MGVCL............................................................................................................. 24
3.
OPERATIONAL PERFORMANCE ANALYSIS ................................................................................................... 26 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 BACKGROUND .......................................................................................................................................... 26 DEMAND SUPPLY SITUATION IN MGVCL ...................................................................................................... 26 SALE OF POWER........................................................................................................................................ 27 REDUCTION IN DISTRIBUTION LOSSES ............................................................................................................ 28 CONSUMER BASE ...................................................................................................................................... 31 POWER PURCHASE .................................................................................................................................... 32 SUPPORT FROM GOG IN PAST 5 YEARS.......................................................................................................... 33 OPERATING INDICES .................................................................................................................................. 33 DISTRIBUTION TRANSFORMER FAILURE RATE................................................................................................... 34 EMPLOYEE RATIONALIZATION ...................................................................................................................... 35 REVENUE REALIZED FROM SALE OF POWER VS AVERAGE COST OF SUPPLY ........................................................... 36 DEMAND SIDE MANAGEMENT ..................................................................................................................... 37
4.
FINANCIAL PERFORMANCE ANALYSIS ......................................................................................................... 39 4.1 4.2 4.3 4.4 REVENUE STATEMENT ANALYSIS .................................................................................................................. 39 BALANCE SHEET ANALYSIS .......................................................................................................................... 42 RATIO ANALYSIS ....................................................................................................................................... 44 ANALYSIS OF CAPITAL EXPENDITURE ............................................................................................................. 45
5.
POWER SECTOR OVERVIEW......................................................................................................................... 47 5.1 5.2 5.3 5.4 5.5 INDUSTRY OVERVIEW................................................................................................................................. 47 ALL INDIA INSTALLED CAPACITY ................................................................................................................... 47 ACTUAL POWER SUPPLY POSITION IN INDIA ................................................................................................... 49 POWER SECTOR IN GUJARAT ....................................................................................................................... 50 INSTALLED CAPACITY AVAILABLE TO GUJARAT ................................................................................................. 50
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5.6 5.7 5.8 6. POWER SUPPLY POSITION OF GUJARAT ......................................................................................................... 51 ALLOCATED CAPACITY TO MGVCL (AS ON 1/10/2010) ................................................................................. 52 POWER PURCHASE FOR MGVCL.................................................................................................................. 52
REGULATORY FRAMEWORK ........................................................................................................................ 54 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 BACKGROUND .......................................................................................................................................... 54 SALIENT FEATURES OF ELECTRICITY ACT, 03 ................................................................................................... 55 NATIONAL ELECTRICITY POLICY, 2005 .......................................................................................................... 59 NATIONAL ELECTRICITY PLAN ...................................................................................................................... 61 TARIFF POLICY .......................................................................................................................................... 69 TARIFF BASED COMPETITIVE BIDDING ........................................................................................................... 71 RURAL ELECTRIFICATION POLICY, 2006......................................................................................................... 71 R-APDRP (RESTRUCTURED ACCELERATED POWER DEVELOPMENT & REFORM PROGRAM) .................................... 72 RENEWABLE SOURCES ................................................................................................................................ 73 RENEWABLE ENERGY CERTIFICATE MECHANISM ............................................................................................. 74 NATIONAL ACTION PLAN FOR CLIMATE CHANGE (NAPCC)............................................................................... 75 STATE MARKET REGULATIONS ..................................................................................................................... 76 KEY PROVISIONS ....................................................................................................................................... 86
7.
MARKET ISSUES AND CHALLENGES ............................................................................................................. 88 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.14 7.15 7.16 OPEN ACCESS REGULATION ........................................................................................................................ 88 ABT IMPLEMENTATION .............................................................................................................................. 89 UI IMPLICATION IN IMPLEMENTATION OF INTRA-STATE ABT ............................................................................. 89 PARALLEL LICENSE ..................................................................................................................................... 90 REGULATORY PROVISIONS .......................................................................................................................... 91 INDUSTRY RISK AND COMPETITION ............................................................................................................... 91 RENEWABLE PURCHASE OBLIGATION (RPO) .................................................................................................. 92 IMPACT OF DSM MEASURES ...................................................................................................................... 93 UNIVERSAL SERVICE OBLIGATION ................................................................................................................. 95 POWER PURCHASE RESPONSIBILITY .............................................................................................................. 95 MARKET PENETRATION AND SERVICE AREA .................................................................................................... 95 COST TO SERVE AGAINST AVERAGE REALIZATION ............................................................................................. 96 RATIONALIZATION OF TARIFFS TO RETAIN HT & LARGE CONSUMERS ................................................................... 97 STANDARDS OF PERFORMANCE (SOPS) ....................................................................................................... 98 OPERATING NORMS REGULATED BY SERC .................................................................................................. 98 FUTURE MARKET OPERATIONS AND FINANCIAL POSITIONS ................................................................................ 99
8.
SWOT ANALYSIS ......................................................................................................................................... 100 8.1 8.2 8.3 8.4 8.5 8.6 BACKGROUND ........................................................................................................................................ 100 STRENGTHS ............................................................................................................................................ 100 WEAKNESSES ......................................................................................................................................... 103 OPPORTUNITIES ...................................................................................................................................... 105 THREATS ............................................................................................................................................... 107 SUMMARY OF SWOT .............................................................................................................................. 111
9.
RISK ANALYSIS ............................................................................................................................................ 113 9.1 BACKGROUND ........................................................................................................................................ 113
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9.2 10. 10.1 10.2 10.3 10.4 10.5 10.6 11. RISK ASSESSMENT & MITIGATION PLANS .................................................................................................... 113 FUTURE BUSINESS OPPORTUNITIES...................................................................................................... 118 PUBLIC PRIVATE PARTNERSHIP................................................................................................................... 119 ANCILLARY SERVICES................................................................................................................................ 120 PROFESSIONAL METER TESTING FACILITY..................................................................................................... 120 NON CONVENTIONAL ENERGY ................................................................................................................... 121 DISTRIBUTION FRANCHISEE ROUTE ............................................................................................................. 121 FUTURE PLANS IN OTHER AREAS ................................................................................................................ 121 OPERATIONAL PLAN .............................................................................................................................. 123 SALES GROWTH ..................................................................................................................................... 124 DISTRIBUTION LOSSES .............................................................................................................................. 124 ENERGY BALANCE ................................................................................................................................... 125 POWER PROCUREMENT FROM VARIOUS SOURCES .......................................................................................... 125 POWER PURCHASE COST FOR FY 2011-12 TO 2015-16 ............................................................................... 127 CAPITAL EXPENDITURE ............................................................................................................................. 128 FUNDING OF CAPEX ............................................................................................................................... 129 OPERATION & MAINTENANCE EXPENSES ..................................................................................................... 130 PROVISION FOR BAD AND DOUBTFUL DEBTS................................................................................................. 130 DEPRECIATION ................................................................................................................................... 130 INTEREST ON LOAN ............................................................................................................................. 131 INTEREST ON WORKING CAPITAL ........................................................................................................... 132 RETURN ON EQUITY ............................................................................................................................ 132 TAXES ............................................................................................................................................... 133 REVENUE PROJECTIONS FOR NON-TARIFF INCOME ................................................................................... 133 ARR FOR FY 2011-12 TO 2015-16 UNDER MYT SECOND CONTROL PERIOD................................................ 133
11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 11.10 11.11 11.12 11.13 11.14 11.15 11.16
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LIST OF TABLES
Table 1: Salient Features of MGVCL.............................................................................................. 10 Table 2: Man*Days Training Chart FY 2009-10 .............................................................................. 17 Table 3: Peak Deficit FY 2007-08 to 2009-10 ................................................................................. 26 Table 4: Past Years Sales Growth Rate ......................................................................................... 28 Table 5: Past Years' Consumer Growth Rate ................................................................................. 32 Table 6: Past 5 Years' Agriculture Subsidy Support provided .......................................................... 33 Table 7: Operating/ Reliability Indices .......................................................................................... 34 Table 8: Profit & Loss Statement FY 2005-06 to 2009-10................................................................ 39 Table 9: Balance Sheet FY 2005-06 to 2009-10 .............................................................................. 42 Table 10: Financial Ratio Analysis FY 2005-06 to 2009-10 .............................................................. 44 Table 11: Capital Expenditure FY 2009-10 ..................................................................................... 46 Table 12: Power Supply situation FY 2003-10 ................................................................................ 51 Table 13: Plant wise Allocated Capacity (As on 1/10/10)................................................................ 52 Table 14: MGVCL's Power Purchase Cost FY 2009-10..................................................................... 53 Table 15: Regulations issued by GERC .......................................................................................... 76 Table 16: RPO for Gujarat FY 2010-11 to 2012-13 ......................................................................... 81 Table 17: MGVCL's Realization as a % of CoS................................................................................. 98 Table 18: Projection of growth in Sales, Load & Consumer base for FY 2011-12 to 2015-16 ........... 124 Table 19: Distribution Loss trajectory FY 2011-12 to 2015-16....................................................... 125 Table 20: Energy Requirement Projection FY 2011-12 to 2015-16 ................................................ 125 Table 21: Availability from Existing Plants ................................................................................... 126 Table 22: Availability from New Plants ....................................................................................... 127 Table 23: Power Purchase Cost Projection FY 2012-16................................................................. 128 Table 24: CAPEX Projection FY 2011-12 to 2015-16 ..................................................................... 129 Table 25: Funding of CAPEX FY 2011-12 to 2015-16..................................................................... 130 Table 26: O&M Expenses Projection FY 2011-12 to 2015-16 ........................................................ 130 Table 27: Bad Debts Projection FY 2011-12 to 2015-16................................................................ 130 Table 28: Depreciation Projection FY 2011-12 to 2015-16............................................................ 131 Table 29: Interest & Finance Charges Projection FY 2011-12 to 2015-16 ....................................... 132 Table 30: Interest on Working Capital Projection FY 2011-12 to 2015-16 ...................................... 132 Table 31: Return on Equity Projection FY 2011-12 to 2015-16 ...................................................... 133 Table 32: Tax Amount Projection FY 2011-12 to 2015-16 ............................................................. 133 Table 33: Non-Tariff Income projection FY 2011-12 to 2015-16.................................................... 133 Table 34: ARR Projection FY 2011-12 to 2015-16 ......................................................................... 134
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LIST OF FIGURES
Figure 1: Area of MGVCL ............................................................................................................... 9 Figure 2: MGVCL's Products & Services......................................................................................... 10 Figure 3: Category Wise Consumer base FY 2009-10 ..................................................................... 11 Figure 4: Administrative Structure of MGVCL ................................................................................ 14 Figure 5: Organizational Structure of MGVCL ................................................................................ 14 Figure 6: Max Demand/Supply (MW) FY 2007-08 to 2009-10 ......................................................... 26 Figure 7: Past 5 years' Energy Sales .............................................................................................. 27 Figure 8: Reduction in Distribution Losses .................................................................................... 29 Figure 9: Past 5 Years Consumer Base ......................................................................................... 32 Figure 10: Past 5 Years' per unit Power Purchase Rate................................................................... 33 Figure 11: Reduction in DTR Failure rate....................................................................................... 35 Figure 12: Class- Category wise Employee Breakup ....................................................................... 35 Figure 13: Past Years' Employee's expenses per unit power sold .................................................... 36 Figure 14: State wise Comparison of Employee Expenses per Unit Power Sold................................ 36 Figure 15: Past 5 Years' Revenue realized Vs Average Cost of Supply.............................................. 37 Figure 16: All India Installed Capacity ........................................................................................... 47 Figure 17: Fuel wise breakup of generation capacity in India ......................................................... 48 Figure 18: All India past Years' Power deficit................................................................................. 49 Figure 19: Region wise Peak deficit in FY 2009-10 ......................................................................... 49 Figure 20: Installed Capacity in Gujarat......................................................................................... 51 Figure 21: State wise Average Cost of Supply Vs Realization .......................................................... 97 Figure 22: Sales breakup FY 2009-10 .......................................................................................... 104 Figure 23: Revenue breakup FY 2009-10 ..................................................................................... 110 Figure 24: MGVCL's SWOT Matrix .............................................................................................. 110 Figure 25: Risk Mitigation Plans ................................................................................................. 113
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LIST OF ABBREVIATIONS
Sr. No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38.
Abbreviations ABT ALDC AMR ARR BPL CAGR CDM CERC CFL CGS CoS CPPs DDG DGVCL Discoms DSM DTC EA/The Act ERP FOR FY GEB GERC GETCO GETRI GIS GoG GoI GSECL GUVNL HP HT IPP KV kVA kVAh kWh LT
Descriptions Availability Based Tariff Area Load Dispatch Centre Automatic Meter Reading Aggregate Revenue Requirement Below Poverty Line Compound Annual Growth Rate Clean Development Mechanism Central Electricity Regulatory Commission Compact Fluorescent Lamp Central Generating Station Cost of Supply/ Service Captive Power Plants Decentralised Distributed Generation Dakshin Gujarat Vij Company Limited Distribution Companies Demand Side Management Distribution Transformer The Electricity Act 2003 Enterprise Resource Planning Forum of Regulators Financial Year Erstwhile Gujarat Electricity Board Gujarat Electricity Regulatory Commission Gujarat Energy Transmission Corporation Limited Gujarat Energy Training & Research Institute Gas Insulated Substations Government of Gujarat Government of India Gujarat State Electricity Corporation Limited Gujarat Urja Vikas Nigam Limited Horse Power High Tension Independent Power Producers Kilo Volt Kilo Volt Ampere Kilo Volt Ampere Hour Kilo Watt Hour Low Tension
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Sr. No 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. Abbreviations LTA MGVCL MOD MoP MOU MU MW MYT NAPCC NPC NEP NTP NTPC O&M PF PGVCL PPPA R-APDRP REC RGGVY RMU ROE RPO SCADA SEZ SLDC SWOT T&C T&D TASP UGVCL UI UMPP UNCCC WEG Descriptions Leave Travel Allowance Madhya Gujarat Vij Company Limited Merit Order Despatch Ministry of Power Memorandum of Understanding Million Units (Million kWh) Mega Watt Multi Year Tariff National Action Plan of Climate Change Nuclear Power Corporation National Electricity Policy National Tariff Policy National Thermal Power Corporation Operation & Maintenance Provident Fund Paschim Gujarat Vij Company Limited Power Purchase Price Adjustment Restructured Accelerated Power Development & Reform Programme Renewable Energy Certificate Rajiv Gandhi Grameen Vidyutikaran Yojana Ring Main Unit Return on Equity Renewable Purchase Obligation Supervisory Control and Data Acquisition Special Economic Zone State Load Dispatch Centre Strength, Weakness, Opportunity and Threats GERC (Terms & Conditions of Tariff) Regulation, 2005 Transmission and Distribution Tribal Area Sub Plan Scheme Uttar Gujarat Vij Company Limited Unscheduled Interchange Charges Ultra Mega Power Plant United Nations Framework Convention on Climate Change Wind Energy Generator
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1. Introduction
1.1
Background
1.1.1 The Government of Gujarat (hereinafter referred to as GoG) notified the Gujarat Electricity Industry (Reorganization and Regulation) Act 2003 (herein after referred to as the Act) in May 2003 for the reorganization of the entire power sector in the State of Gujarat. Pursuant to the above, GoG in their letter vide GO / 19th August 2003 had directed Gujarat Electricity Board (herein after referred to as GEB) to form four Distribution Companies (Discoms) based on geographical location of the circles. Accordingly the four distribution companies had been incorporated with the Registrar of Companies on September 15th, 2003. 1.1.2 MGVCL is one of the distribution companies engaged in distribution of electricity in the central zone of Gujarat. MGVCL obtained its Certificate of Commencement of Business on the 15th October, 2003. However, the company could not commence its operations during the financial year ended 31st March 2004 and 31st March, 2005. The Company has started commercial function w.e.f. 1st April 2005. 1.1.3 As a step further of deepening its enterprise capability and capitalizing growth opportunities, the management of MGVCL has carved out big expansion plans which will not only allow MGVCL to increase its volume of power distribution but also fresh investment in increasing line network (including renovation, refurbishment and system up gradation) will reduce the distribution losses and increase in productivity. The exercise will also lead to a marked improvement in the Financials of the company. 1.1.4 Organisational development and institutional strengthening are the supporting factors that transform MGVCL into a commercially viable vibrant organisation. Therefore, systemic improvements like business process re-engineering, best practices, information technology initiatives, performance management system and human resource development and involvement needs to be formulated and implemented across the organisation in a standardised manner. 1.1.5 Apart from internal reforms institutional strengthening and organisational development MGVCL also needs to gear up to the regulatory challenges, both in terms of operational efficiency and commercial & financial implications of the same. April 2011 Page 1
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1.2 Business Activities 1.2.1 The Company is a Distribution Licensee within the meaning of Section 2(17) of Electricity Act 2003. Further, Section 42 and 43 of the Electricity Act 2003 prescribes the following duties of the Distribution Licensee: To develop and maintain an efficient, co-ordinated and economical distribution system; To supply electricity on an application of the consumer in accordance with the provisions specified in the Electricity Act 2003; To provide non-discriminatory open access to the consumers; To establish a forum for redressal of grievances of the consumers;
1.2.2 Since MGVCL has been vested with the function of distributing power by the State Government of Gujarat, the Business Scope of the Company falls within the legal framework as specified in the Act and can include: To develop the required distribution infrastructure within the State of Gujarat to meet the demand of the consumers; To Operations efficiently the existing distribution infrastructure; Merchant Sale of Power in the event of availability of surplus power after meeting the requirement of own consumers with whom the capacity is contracted presently; Other associated business like providing Training, Research and Development activities, Technical consultancy services and O&M related services; Contracts for outsourcing of distribution related activities, joint venture participation in the market, etc.
1.3
Objective of the Business Plan
1.3.1 It is important that MGVCL has a complete re-look at its business in view of the current environment to develop a holistic way forward for the organisation. The Forum of Regulators (FOR) in its report on MYT framework has recommended as under: 6.1.1 Annual revision of performance norms and tariff might not be desirable. During the first control period, which should not be more than three years, the opening levels of performance parameters should be specified as close to the April 2011 Page 2
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actual level of performance as possible and a trajectory of improvement of norms to desired level be provided with an incentive and disincentive mechanism to share efficiency gains with consumers. 1.3.2 The FOR Report recommends that the norms for the first Control Period to be specified as close to actual level of performance as possible. FOR Report also emphasises on specifying a trajectory to achieve desired levels of norms, which entails fixing of performance trajectory on normative basis rather than at actual levels for the second Control Period onwards. Distribution licensees should submit the business plan and power purchase plan, for approval of the Commission, at least six months prior to submission of MYT petitions 1.3.3 This effectively requires the Utilities to submit their MYT Petitions on or before 30th November of the previous year for which tariff has to be determined. The FOR recommendations provides for submission of Business Plan six months prior to submission of MYT Petition, i.e., 30th November. Hence, date for submission of Business Plan would be 31st May. But in the present context, as the date has already passed for the second Control Period, it would be difficult for Utilities to file a Business Plan as per FOR recommended timelines. 1.3.4 Hence as directed by the Hon'ble commission Business Plan for the second Control Period is to be filed along with the MYT filings for the second Control Period. Keeping the above discussion in mind, MGVCL has developed a comprehensive business plan for the company for the period FY 2011-12 to FY 2015-16. The business plan in following sections intends to cover the above issues from the strategic, competitive, financial, commercial and organisational perspectives. 1.3.5 MGVCL would submit petition for True Up for FY 2009-10, Annual Performance Review for FY 2010-11 under the Multi Year Tariff regime (1st control period) and petition for Multi Year Tariff for the second control period FY 2011-12 to FY 2015-16. 1.4 Approach to the Business plan 1.4.1 The Business Plan is initiated based on a review of what is on the companys current operations, operational performance and organisation structure. The formulation of strategies is driven by the consideration of the vision, mission and April 2011 Page 3
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values that the Company holds and cherishes. The existing profile of the Company, its strengths and weaknesses, its policies, and the emerging legal and business environment plays an important role in the formulation of the plan. This stage also captures its role in Gujarat power sector and its technical and commercial relationships with the other utilities operating in the state. 1.4.2 The Business Plan has been developed keeping in view the current performance over the previous year with a view to develop targets that are realistic and achievable and that provide an impetus to improving performance. 1.4.3 It is important that MGVCL tries to meet the performance as per the projections. There is therefore a need to ensure internalisation of these projections so that targets can be identified at the working level to ensure compliance. That is to say that there is a need to disaggregate the projections to lower levels so as to involve the Circles in process and also to convey the direction in which the company is headed. 1.4.4 The approach and methodology adopted for preparation of Business plan of MGVCL is as follows. The business plan is prepared for the projection period FY 2012 to FY 2016. The assumptions like investment plan, load forecast, loss reduction plan, power procurement plan etc. are maintained as provided in MYT petition for second control period FY 2011-12 to 2015-16. 1.4.5 This Strategic Business Plan is intended to chart the Companys way forward. It acts as an engine for change and aims to consolidate the various ideas and proposed course of action together with a common thread, to take the Company into the future. The Plan will enable the Company to harness its resources so as to develop a desired commercial orientation. 1.4.6 Accordingly, this business plan is developed for the Control period bearing in mind the growth plan for the control period after considering the strength and weakness of the company and evaluating its business environment. The business environment has evolved considerably in a number of ways that affects MGVCLs strategic planning. The Business Plan is intended to give a comprehensive and up-to-date representation of the company, its market, the impact of new regulations, and the strategies that has been developed by MGVCL to achieve the company goals, to carry out its mission and reach its vision. However, as mentioned above, there are April 2011 Page 4
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number of internal and external factors which affect the planning of the company and thus it makes this document a very dynamic document and which calls for regular reviews of the plan with a view to introduce any mid-term corrections. 1.4.7 Due to changing business environment and the regulations governing the distribution business, it is submitted that Honble Commission should take cognizance of the fact that the business plan is a dynamic document which may need to be updated at various intervals to align the growth path of the company with the external business environment and internal factors affecting the business / operations of the company. Depending on the amount and complexity of the content that needs to be updated, one could distinguish two levels of update. On a lower level, there is detail and factual updates that require changes within the business plan. Factual updates are relatively straight forward and mostly comprise minor changes of specific data, such as numerical or other factual information. At the higher level, there is the conceptual update. Conceptual updates may be dictated by an market shifts, changes in the competitive environment, legislative reforms, political influence and many other factors, and thus, require deeper analysis, and more profound changes in the business plan. Thus, updation of the Business Plan would be dependent on the management as they would have to decide which events and changes are important and how they need to be reflected in the business plan.
Business Plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.
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2. MGVCL Profile
2.1
Background
2.1.1 GEB was engaged in the business of Generation, transmission and supply of Electricity under the provisions of the law prior to enactment of Electricity Act 2003 and have been re-organised under Section 131 and 133 of the Electricity Act 2003. Therefore, the successor entities of GEB are considered as a Deemed Licensees under the proviso (1) of the Section 14 of the Act and in line with the given provisions, MGVCL is a deemed distribution licensee for supplying electricity in central zone of Gujarat. 2.1.2 As a part of Power Reform Process, Gujarat Electricity Board (GEB), the promoting body, has been un-bundled effective from 1st April, 2005, into separate seven Companies with functional responsibilities with complete autonomous operation for Generation Transmission Distribution Trading 2.1.3 The distribution activities were transferred to four Discoms based on geographical location of the circles, which are: Dakshin Gujarat Vij Company (South Zone) Uttar Gujarat Vij Company (North Zone) Madhya Gujarat Vij Company (Central Zone) Paschim Gujarat Vij Company (Rajkot and Bhavnagar Zone) 2.1.4 GEB was engaged in the business of Generation, transmission and supply of Electricity under the provisions of the law prior to enactment of Electricity Act 2003 and have been re-organised under Section 131 and 133 of the Electricity Act 2003. Therefore, the successor entities of GEB are considered as a Deemed Licensees under the proviso (1) of the Section 14 of the Act and in line with the given provisions, MGVCL is a deemed distribution licensee for supplying electricity in Central zone of Gujarat. 2.1.5 The company has become operational effective from 1st April, 2005. Since the entire April 2011 Page 6
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share capital of the Company is held by GUVNL which is a government Company, the Company is also a Government Company pursuant to the provisions of Section 617 of the Companies Act, 1956. 2.2 Vision and Mission of MGVCL Any organization's vision is all about what is possible, all about that potential. The mission is what it takes to make that vision come true. The long term goals are set keeping the vision statement in mind but mostly the short term targets are influenced by the mission statement. All these inter woven together create an identity for your company which gives a unique image to the company and develops the company culture. Each and every team member contributes to the realization of these goals, targets and the image carving of the company. 2.2.1 Vision Vision without action is merely a dream, Action without vision merely passes time, Vision with action can only change the Organisation. The Vision should define what an organization will become at the end of the strategic planning horizon. The Vision is a future state description of what we aspire to become and what will be pursued. A Vision needs to identify strategic objectives with wide appeal looking for shared values and ideals. A vision needs to be linked with the core competencies of the business and its necessary to assess continually and refine the vision to make it more appealing and credible. MGVCL desires to achieve customer satisfaction through its excellent service which is envisaged in its Vision statement as follows:
Customer satisfaction through service excellence
2.2.2 Mission A mission statement outlines what the company is now. It focuses on today; it identifies the customer(s); it identifies the critical process(es); and it states the level of performance.
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The Mission Statements of the Organisation needs to specify the organizational purposes and translate these purposes into objectives that can be assessed and controlled. Developing a mission statement can help reveal and resolve divergent views among the stake holders and their importance for the Company. They are effective vehicles for communicating with important internal and external stakeholders. The Mission statement is as follows: To provide reliable and quality power at competitive cost To reach global standards in reducing distribution losses 2.2.3 Core Values The values are the whole aura engulfing each and every thought, word, deed and action taking place in your organization. The value statement prescribes the principles that company will follow to achieve its Vision and Mission. All organization follows a set of values that defines ethical and moral benefits. Value statement is not explicitly stated but taken to be a part of Vision and Mission statements. The Core Values of MGVCL are identified as given below: Customer satisfaction Pride of belongingness Excellence Participative work culture Being ethically and socially responsive 2.3 Operating Structure of MGVCL
2.3.1 Company operates through the network spread over 24000 Sq Kms covering five full districts in Central region of Gujarat. The consumers' mix consisting of various categories such as residential, commercial, industrial, agricultural and others consisting of around 25 lacs consumers which are served by 4 circles. The business affairs are managed/taken care of by Corporate Office presently headquartered at Baroda.
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Figure 1: Area of MGVCL
2.3.2 The company distributes electricity in: 5 districts 49 talukas 4,426 villages Area Serviced: 23, 854 sq kms Population Serviced: 11.18 million No. Of Consumers: 2.59 million The Company is responsible for reliable and affordable power distribution to residential areas. Commercial complexes, street lights, water works, agriculture, traction as well as industries. 2.3.3 As a distribution licensee, MGVCL is carrying out the retail supply of power to the end users as well as also maintain the wire business for supply of such power. The primary aim of a distribution licensee is to provide continuous and quality power supply to the end consumers. In line with this, MGVCL is developing the distribution infrastructure to meet the load growth and maintain the supply of power to the consumers. MGVCL is also engaged in improving its technical and financial performance with reference to national benchmarks by adopting the best available practices and absorbing the best available technologies.
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2.3.4 The products and services of the company are: MGVCL performs several functions related with distribution of electricity, network connections, repair and maintenance and also commercial aspects too. The various functions are categorized as below:
Figure 2: MGVCL's Products & Services
Network Construction Repair Connections
Electricity Sourcing Operation Distribution Of Electricity
Information Processing Of Applications Customer Queries Customer Complaint Meter Reading Revenue Management Sales And Marketing
2.3.5 The salient features of the Company are as follows: MGVCL serves a large number of consumers, has a high load connection and a network spread across vast widespread areas. The brief profile of the company is as follows:
Table 1: Salient Features of MGVCL
Particular District Covered: Total Area in Sq.Km. Total Consumers : No. of Towns No. of Villages Total Circles Total Division Offices Total O&M Sub-Division Offices Total Sub-Stations Total No of 11 kV Feeders(excl. SST) Total Transformers (Nos.) HT LINE (KM) LT LINE (KM) Total Cash Collection
Details (30.09.2010) Vadodara-Kheda-AnandPanchmahal-Dahod 23,854 Sq KM 2593746 Nos. 42 Nos. 4,305 Nos. 4 Nos. 17 Nos. 86 Nos. 121 Nos. 1145 Nos. 53453 Nos. 36077.10 KM 52548 KM Rs. 1623.95 Crs
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2.4 Category wise number of Consumers Given below is a graph depicting the category wise breakup of the consumers within MGVCL. Residential category consists of the largest consumer base followed by Commercial & then Agriculture.
Figure 3: Category Wise Consumer base FY 2009-10
Residential Commercial Industrial LT Public Water Works Agriculture Street Light Industrial HT Railway Traction 232418, 9.66% 25714, 1.07%
8112, 0.34%
66965, 2.78%
6049, 0.25%
1186, 0.05%
6, 0.00%
2064337, 85.84%
2.5
IT Initiatives
2.5.1 E-Urja implementation is being done within the organization & with which several processes will become computerized. E-urja is an end to end ERP solution, it will help in beter housekeeping, billing, efficiency, effective maintenance, asset management, consumer relation management, inventory management, finance management, HR management, etc. At present, all the sub-divisions, divisions & circles are connected through e-urja & company envisages that in the current financial year 2010-11, ERP solution shall be place in the system on end-to-end basis. 2.5.2 E-gram Panchayats: Government of Gujarat has designated various Gram Panchayats as E- Gram Panchayats (E-GPs), who qualified as per eligibility criteria for egovernance and modernization of various villages of Gujarat. In order to make such E-GPs self sustained by increasing their income & also to facilitate the consumers of the company for payment of energy bills in their villages itself, GOG has decided to award the agency of collection of energy bills to such E-GPs. There are 2,809 E-GPs under 5 districts of the company. The requisite agreements are executed with TDOs in all the E-GPs/ villages and all these E_GPs have started bill collection work and many villagers are utilizing this new facility of paying their electricity bills through EApril 2011 Page 11
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GPs. 2.5.3 SCADA, GIS, GPS, Consumer Indexing, IVRS Call centre have also been implemented, showcasing MGVCLs initiatives in latest technology. There is also E-Payment facility from anywhere across the world. Existing SCADA system in Vadodara City will be up graded under projects approved under R_APDRP scheme. GIS is implemented and commissioned in 10 nos. Of towns. The benefits of SCADA implementation are: 2.6 DMS application such as Fault Detection, Isolation & Restoration , Loss minimization via GIS / TCM applications Exchange of outage / restoration data with CCC for effective management of distribution system Reduction in outage time resulting in additional revenue generation. Availability of real time data Reduction in distribution losses Optimal Utilization of substation equipment Balance loads Integration with MIS for better management & planning
Human Resource Management
2.6.1 Industrial Relations continue to be cordial. Many need based training & development programs are organized with special emphases on fostering a culture of innovation to develop competency of employees & thereby enhance organizational effectiveness & productivity. 2.6.2 HR Department of MGVCL other than undertaking routine HR work has also contributed in areas of quality, customer relations and energy conservations. 2.6.3 Currently, HR department consist of HR Department of AGM, DGM and P.O who undertakes all the activities related to HR Function. 2.6.4 HR Department has taken lead as far as getting of ISO certification for MGVCL thereby contributing towards quality improvement. HR department had conceived, developed and implemented a project called SAMPARK thereby we proactively meet the consumers at nonconventional places and at leisure of the consumers. HR Dept. has also taken lead as far as taking steps of energy conservations, whether be it educating the school children on steps and benefits of energy conservation or
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educating the house wives on their role on energy conservation. 2.6.5 MGVCLs HR Dept. strongly believes in training for better development of employees and thereby prepared structural need based training calendar for its employees from Class IV to I. 2.6.6 Discipline is an important aspect for running an organization and the HR Department believes in fare and timely actions as far as disciplinary actions for its employees. 2.6.7 The Appraisal system in the organization is done by confidential performance review done by the reporting officer followed by the reviewing officer. The performance is judged on several parameters and marked on a scale of five and accordingly promotions are done within the organization. 2.6.8 A performance management system is also in place which is at the initial level of organization-business management. 2.6.9 HR Department has also taken a lead as far as use of E-urja is concerned and its major functions like confidential reports, employees traceability and all other employees related reports are now on line. 2.6.10 Employee Details The total number of employees in MGVCL as on 31st Mar, 2010 was 6208. Out of which 3605 were technical & the rest 2603 were non technical staff. 2.6.11 Administrative Division of MGVCL The consumers' mix consisting of various categories such as residential, commercial, industrial, and agricultural and others is served by Sub Division who are headed by Divisional Offices throughout its operational area. This Divisional Offices has to report to their respective Circles. The business affairs are managed by Corporate Office presently headquartered at Vadodara.
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Figure 4: Administrative Structure of MGVCL
2.6.12 Organisational Chart The Organizational Structure of MGVCL is depicted here under:
Figure 5: Organizational Structure of MGVCL
2.6.12.1
Roles and Responsibility Finance & Accounts (F&A): Finance department does all the function related with cash, bank reconciliation, overall fund management, raising loans from Financial
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institutions & banks, Working Capital management, passing bills, salary, PF & pension of the employees Account department deals with core corporate accounts, cost audit, taxation, insurance, annual report & financial statement, internal audit, Government audit, matters related to revenue, govt grants & subsidies Account section also deals with tariff & ARR petition, PP analysis, ALDC & ABT matters, corporate budget & planning, annual plan for planning commission, business plan and its implementation. Regulatory affairs & Commerce: The regulatory activities related with SERC/SLDC/STU/Holding Co and Bulk Power Management is done by the department. Also acts as interface between the organizational & external agencies for regulatory related matters & issues. Processing of HT Applications, Consumer Redressal Forum, Matters related to Commerce & Commercial Circulars & ARR/ Tariff petition filing are also handled by the R&C department. Procurement All matters related to procurement, functioning of all stores & inventory control, vendor registration & factory inspection, approval of vehicle hiring proposals, department/ implementation of E-Urja, any other work entrusted by competent authority. SD&P System development & planning Compilation of material requirement for all works/projects and submission to procurement department and follow up thereof, allotment of material/issuance of dispatch instruction, administrative approvals of proposals under ND/SIS, MP/MLA and all other schemes, technical scrutiny of tenders, development of material specification, material inspection, T&D Loss, MIS, Franchise development, RE wing including RGGY schemes. CC - Circle Coordination Review of progress of all schemes/projects, regular monitoring of various activities of S/Dn & Circle, Coordination of EC and Apex Committee meeting, matter pertaining to RTI Act, transformer repairing, Civil wing 7 works related to it, HT/LT maintenance program & work related to it, follow up & daily activity report, disaster/accident management, preventions & compensations. April 2011 Page 15
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HR Human Resource Human Resource department does all the function related with screening, recruitment, selection, training & development of the employees. It also does appraisal, promotion along with performance management of the employees Vigil Look after the vigilance activities related to power distribution and I/C programmes to facilitate effective supervision of vigilance activities. 2.6.13 Activities undertaken for Human Resource Development Training The Human Resources being the most valuable asset the Company endeavors to provide an environment that each employee is motivated to contribute his/her best to achieve the Companys Goals/Objectives. The Company has taken series of proactive HR initiatives including need based training and development programmes with special emphasis on developing competencies of employees and thereby enhancing organizational effectiveness. The Company has provided various training and development activities for its staff at GETRI (The Training Centre of GUVNL at Baroda), Power Stations and even at external places. Performance Appraisal Performance appraisals of Employees are necessary to understand each employees abilities, competencies and relative merit and worth for the organization. Performance appraisal rates the employees in terms of their performance. Performance appraisal is necessary to measure the performance of the employees and the organization to check the progress towards the desired goals and aims. The performance appraisal is done every calendar year. The company has category wise performance form for all its employees. The performance appraisal in the organization is done by confidential performance review system that is done by the reporting officer and reviewed by the reviewing officer. The performance is judged on several parameters and marked on a scale of five and accordingly promotions are done within the organization. In case of any adverse comment from immediate reporting authority, the Appraisee can appeal against it to the HR Deptt. and sort out the matter. Promotion Page 16
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The promotions in the company are based on the Annual Performance Appraisal. The company also follows the Seniority basis promotions. The seniority cum merit and merit cum seniority both the points are taken into consideration while promoting the Employee.
Table 2: Man*Days Training Chart FY 2009-10
Class I II III IV Total
Total Employees 1463 1284 2831 1748 7326
1/2 day 25 0 0 0 25
1 day 965 900 1850 913 4628
2 day 838 256 1390 510 2994
3 day 116 145 398 265 924
2.7 Corporate Social Responsibility 2.7.1 MGVCL is a leading power distribution company in Central Gujarat with its Head Quarter located in Vadodara and an ancient city, popularly known and recognized as cultural capital of Gujarat. MGVCL being responsible distribution utility aims to fulfil its social responsibilities towards the citizens of the State of Gujarat. 2.7.2 Adoption of Chhotaudepur ITI MGVCL has adopted Chhotaudepur Industrial Training Centre for upgradation under Public private partnership scheme of Central Government. This will benefit the students of Chhotaudepur and surrounding area. MGVCL is taking active interest in upgradation of the ITIs infrastructure. 2.7.3 MGVCL as a long ranging aim to actively participate wherever possible and required in the benefit of the citizens of Gujarat. 2.8 Energy Conservation Measures 2.8.1 Various Energy Conservation Measures have been taken up by MGVCL which are as follows: MGVCL from time to time organize energy conservation camps thereby distributing awareness materials to consumers and people for educating them on energy conservation. MGVCL also recognize the children as the future generation and MGVCL has planned the children solar park in heart of Baroda city to educate the future generation on the benefit of use of solar energy and energy conservation. April 2011 Page 17
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High-loss feeders have been identified, close monitoring is being done up to the Sub-division level to reduce the technical losses and meters are provided on TCs for better control on systems to identify the weak pockets with high losses. Purchase of energy efficient transformers i.e Star Rated Transformers by Bureau of Electrical Energy having low losses than current IS level & thereby reduction in power consumption by the transformers which ultimately result in reduction of distribution losses. Energy audit program implemented vigorously All the transformer centers of city area are provided with static meters. The TC meter is taken on monthly basis along with the meter reading of consumer connected as TC. Meters with low burden also significantly reduce distribution losses. Cables & Conductors with more cross sectional area are utilised to reduce resistance which also reduces distribution losses. Regular and periodical maintenance of line and equipments. Pamphlets explaining energy saving measures and its efficient use along with energy bills are circulated for public awareness. The seminar on energy conservation was also arranged during the year with participation of all categories of consumers. Mass awareness amongst consumers for energy conservation. Under the publicity campaign, printing of pamphlets, posters, banners, telecasting of short films on TV, cable network and on radio, advertisement in print media, depicting hoardings containing Energy saving messages/ slogans etc. have also been carried out during the celebration of Energy Conservation Week. Under the Swarnim Gujarat Mahotsav, the month of August-2010 was celebrated as Urja Shakti Month Aug-2010, under which various programs were organized by the Company for creating awareness of energy conservation with active involvement of the employees and public at large.
2.8.2 Specific areas in which R&D carried out by the Company: Cable and Conductor measuring instruments are proposed for all four Circles of the Company. Installation at Narol RSO under Sabarmati Circle is completed. Concept of single phase transformer of 5 KVA introduced for reduction of technical and commercial losses. Utilisation of 2 core 4mm2 cable instead of conventional 2core 2.5mm2 cable for single phase service line to reduce technical losses.
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2.8.3 Advantages of HVDS by 5 KVA single phase T/C over LVDS Reduction of line losses at optimum capital investment Reduction in voltage drop. Reduction in failure of DTC. Prevention of Theft of energy. Improvement in Reliability of supply. 2.9 Activities related to Consumer Service
2.9.1 24 X 7: Customer care centre for best services Madhya Gujarat Vij Company Limited is a leading power distribution company in Gujarat, which distributes electricity in the central area of Gujarat. And mission is to provide uninterrupted supply. To offer best services to valuable customers, we are providing 24 hour customer care centre working for 365 days. Following services which we are rendering to customers: Handling individual power complaint Restoring power supply after repairing major faults Preventive maintenance is an important pro-active measure Maintaining electric network from consumer to substation Providing emergency service in monsoon season Providing services to resolve no-power complaints in area / society Emergency maintenance during burning of jumper, snapping of conductor, tree falling etc. Total 28 customer care centers are proving services in Anand and Kheda District under Anand city circle office of MGVCL, while in Baroda city area 17 customer care centre are providing service for 24 hours. In case of Baroda district rural area, MGVCL has 19 customer care centers under Baroda (O&M) circle and in Godhra district MGVCL has 15 customer care centers under Godhra circle. 2.9.2 Salient features of Trouble call center The trouble call center to provide better service to customers by leveraging the GIS data Dialing with multiple lines and Interactive Voice Response System (IVRS) to ensure the calls are properly registered and attended Decision support system to identify the probable cause for loss of power supply April 2011 Page 19
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by analysis of the calls received. Dispatching of crew to attend the fault considering the expertise of the crew, its availability and mobility Monitoring identification of fault, detection of the fault, fault isolation and restoration of power supply.
2.9.3 Any Time Payment It can be operated by the customers 24/7. It accepts cash/cheque/DD/Payorder, issues an acknowledgement on every payment made and is a touch screen and multimedia-based system. When the customer places the voucher/bill in the designated slot under the barcode scanner, the ATP will automatically get started. Suitable prompts are provided for guidance. 22 fully computerized ATP Centre have been installed in MGVCL (Baroda City-15, Anand-7) to facilitate consumers to pay their energy bills at any time. 2.9.4 Energy Bill Collection Mobile Van from consumer's door step. The company has initiated various steps towards consumer care and consumer satisfaction. In this direction one more facility of energy bill collection from consumer's door step is introduced by company. Under the above initiative, a Mobile Van for bill Collection will move in various areas of the sub-division and payment of energy bill of the consumers will be collected at their door step and computerised receipt will be issued. Initially the consumers of Alkapuri, Gotri & Fatehgunj subdivisions will have this facility and mode of payment through cheque. 2.9.5 Hand Held Equipment A user-friendly, compact and low-cost Hand Held Terminal for field applications. Typically suitable for meter reading applications of upto 2000 consumers. It features a Robust & Handy Integrated printer version for direct connection to external printer. Spot validation minimises billing errors Increases billing efficiency & reduces revenue cycle Meter reading with date and time stamp. Applications development is in HLL (C language). Monthly billing with hand held instruments is in place in Baroda city, Nadiad, Anand, Godhara, Dahod & Dabhoi towns. 2.9.6 E-payment facility The company has launched the e-payment facility in June, 2010, as a part of providing better services to consumers. With the help of this facility, the consumers shall be able to make the payment of their electricity bill through internet either by using net banking or Credit/ debit card at their own convenience at any time from anywhere within the due date of payment of electricity bill. The above arrangement April 2011 Page 20
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has been made with more than 20 banks covering all major Public Sector Banks and Private Sector Banks. 2.9.7 Explanation of the parameter mentioned in the bill is given on the website for clearing consumers billing related doubts. The companys website is regularly updated to make it more informative & customer friendly. 2.10 Other Activities carried out by MGVCL
2.10.1 Drum Project The United States Agency for International Development (USAID) in collaboration with the Ministry of Power (MoP), Government of India conceived an innovative program aimed at accelerating the pace of reform in India's electricity distribution sector with a special focus on improving the nation's rural energy supply situation. The goal of the Distribution Reform, Upgrades and Management (DRUM) Project is to improve the quality of electricity services in India. While it will focus on the entire distribution sector, DRUM views rural electrification as key to a sustainable solution for India's electricity supply problems. A core focus area calls for the development of a rural electrification strategy based on the successful experience in the US. A team from the US Rural Utilities Service (RUS) will join with India's Rural Electrification Corporation (REC) to advise on this and related matters. Other major components of the DRUM initiative include pilot projects to create centers of excellence. DRUM also has an ambitious training component with an extensive array of specialized programs focused on electricity distribution. An allied program will address unique aspects of the water-energy nexus. Background and Perspective DRUM Program the DRUM program assists MGVCL by helping MGVCL create a center of excellence. The center serves as a model to be both scaled up and replicated elsewhere in MGVCL (and other utilities). DRUM consists of technical assistance (TA), training needs assessment (TNA), and funding. At Umreth sub division DRUM project is being implemented. Advance technology Surge Arrestors were installed on all the transformer centre. Socio Economic Umreth Taluka comprises one main town (Umreth) with 35 numbers of surrounding villages having a total of 226 square kilometers of service area. April 2011 Page 21
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2.10.2 RMU - CONCEPT OF RING DISTRIBUTION: The concept of Ring distribution was introduced to get the uninterrupted power supply even in the event of faults in the Ring feeders. The first step was to go for OIL based RMUs since the initial cost of the RMU could be fitted well within the budgets. The RMUs were installed and commissioned for important HT consumers and the concept of RING distribution was validated. This proved to be a major success in the city and consumers were very satisfied on the overall power situation. This was how the concept of RING MAIN DISTRIBUTION was first time established in the city. The power demand was growing and the no. of consumers was also growing with the time. This growth became exponential within last one year and the electrical network also became complex due to increased connections, size of the load transformers, fault level etc. Within the fixed geographical size MGVCL needed to cater to the increased demand with better efficiency. The right solution was to go with the time and bring in the latest technology in the system. Some of the major advantages achieved were: Space saving - Atleast 50% of the total space is reduced. The same is being converted into office area, customer care center, billing section etc. Minimum maintenance in Oil RMUs & no maintenance in SF6 RMUs and therefore effective utilization of staff. The protection is with circuit breaker along with a self-powered relay. This combination gives the most reliable protection for transformers as well as feeders. Minimum inventory in Oil & no inventory or maintenance of spares in SF6 RMUs is required since the unit itself is fully maintenance free for its life. Faster restoration of supply in the event of faults. Safe and easy to operate. No personnel hazards. Better aesthetic values given to substation leading to healthy and improved working environment. RMUs are already ready for SCADA/ automation to be done in near future.
This was a major breakthrough achieved by MGVCL and have now found the right product for the right application. MGVCL has taken these steps of modernization in the direction towards customer satisfaction and excellence. The thinking process and work is being extended further to look into the possibilities April 2011 Page 22
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of underground network across the city with usage of Ring main technology. 2.10.3 GIS implementation GIS is implemented & commissioned in 10 nos. of towns. GIS has been implemented at Vadodara City Circle, Padra, Dabhoi, Karjan, Khambhat, Kapadwanj, Umreth, Nadiad, Halol, Godhara, Dahod etc. The major features of GIS implementation are as follows: Identification of all network components & every consumer with geographical reference and their relationship are available at the click of mouse; Integration of heterogeneous information and connecting activities based on geographic proximity. Developing IT enabled benchmark & scientific approach to maintenance activity of the Network. Since MGVCLs network is overhead & visible the approach was sufficient to meet the requirements. Oracle database created for assets, consumers & GPS details Custom built software to meet MGVCLs functional requirements. A Rover with the base gives accurate location of poles, transformers etc. Above details fed into a computer to generate the electrical distribution network Map is stored in digital form making it easy to maintain and update. Every consumer is identified as a distinct location on a feeder and every link from the sub-station to the consumer including lines, transformer centers is available. Quick rectification of faults Trouble Call Center. Identification of low voltage and high losses. Energy audit with system planning and analysis. A proper asset management due to such activity. 2.10.4 Testing of high quality meters The HiTech Laboratory for testing of high quality meters with accuracy confirming to Indian Standards is set-up at Baroda whereby 20 numbers of testing positions have been implemented. The MTE Make Fully Computerized meter testing bench with CAMCAL Software is currently used in all over the world. 2.10.5 R-APDRP Under part A of R-APDRP, projects for 17 towns of the company at an estimated cost of Rs 93.75 Crs have been sanctioned. (It includes common data centre and disaster recovery centre for all fellow distribution companies). The company has also
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appointed consultants & IT implementing agence for implementation of he said projects. Under part B, projects for 13 towns of the company at an estimated cost of Rs 103.03 Crores are sanctioned during the current year. 2.10.6 Implementation of remote access metering to HT consumers The meters provided on consumer installation are augmented with an electronic gadget, which provide the readings and other parameters directly. In this scheme, GSM communication system is used for taking automatic meter reading without visisting the sites of consumers. The complete metering data becomes available on the main server & the syatem also provides signals for any tempering with meters or meter data. 2.10.7 Implementation and use of advanced technology Use of SCADA system for better load management Office automation through e-urja programs Replacement of all old conventional meters by high precision meters to record actual energy 2.11 Major Achievements of MGVCL In past five years from the date of segregation of GEB, MGVCL has tried to perform individually based on the characteristics that were awarded due to unbundling. MGVCL has tried to overcome such stringent situation and has tried to conquer through their best efforts and dedication to bring overall efficiency in the system. MGVCL has been awarded INDIA POWER AWARD-2010 and Certificate by Council of Power Utilities, New Delhi for Innovation in Design and Execution of Projects for the year 2009-2010. Awarded BRONZE SHIELD and Certificate of appreciation by Ministry of Power, Government of India for MERITORIOUS PERFORMANCE for the year 2008-2009. Recipient of ENERTIA AWARD-2009 award for best performing PSU utility recipient of I.E.E.M.A. power awards -2008 for excellence in power distribution in urban and rural sector Awarded GOLD SHIELD and Certificate of appreciation by Ministry of Power, Government of India for MERITORIOUS PERFORMANCE for the year 2006-2007. Gujarat State Won 1st prize in INDIA TECH EXCELLENCE AWARD in November, 2007 MGVCL case study was considered for this award MGVCL is the only DISCOM to receive NABL accreditation for Testing and April 2011 Page 24
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Calibration for its High Tech Meter Testing Laboratory at Vadodara. MGVCL has also set up the State of the Art testing facility for CT and PT MGVCL is the 1st Government Owned Distribution company to be ISO Certified MGVCL got the patent for improved single phase power system popularly known as Specially Designed Transformer (SDT). Its for the first time in history that such a revolutionary technology breakthrough invented by a DISCOM has received a patent for such invention. The company was the highest amongst all fellow subsidiary distribution Companies in obtaining the performance based incentive decided by Gujarat Urja Vikas Nigam Limited (GUVNL), the holding Company.
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3. Operational Performance Analysis
3.1
Background
3.1.1 This section elucidates MGVCL overview of its business into operational performance for the previous years. A comparative analysis of the operational performance for various years in relation to Sales, T&D Loss, Reliability indices, Collection Efficiency, etc is discussed here. 3.1.2 In spite of the fact that MGVCL is inherited with an old distribution infrastructure from the erstwhile GEB, MGVCL is making all out efforts to improve / sustain the performance as well as to supply quality power to the consumers. 3.2 Demand Supply Situation in MGVCL
3.2.1 The demand-supply for electricity has increased manifold; despite significant overall progress in the power sector, there had been a significant gap between demand and supply. In FY 2009-10, the gap seemed to reduce considerably to 8% as shown below:
Table 3: Peak Deficit FY 2007-08 to 2009-10
FY 2007-08 FY 2008-09 FY 2009-10 Unrestricted Demand (Max MW) 1353 1318 1045 Restricted Demand (Max MW) 1338 1303 1040 Supply (Max MW) 938 970 959 Peak deficit (%) 30% 26% 8%
Figure 6: Max Demand/Supply (MW) FY 2007-08 to 2009-10
Restricted Demand (Max MW) 1600 1400 1200 1000 800 600 400 200 0 1338 1303
Supply (Max MW)
1040 938
DEFICIT AREA
970
MW
959
FY 2007-08
FY 2008-09
FY 2009-10
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3.3 Sale of Power 3.3.1 Currently, MGVCL is serving around 25 Lacs of consumers of which around the maximum consumption is from residential, agricultural and HT industrial consumers. The factors affecting the actual consumption of electrical energy are numerous and often beyond the control of the licensees (policy, economy, individual consumers conditions, recession, etc.) or even the consumers (weather, variations in demandsupply conditions of the consumers product, etc.). 3.3.2 Given below is a graph depicting the sale of power across different categories for the year 2005-06 to 2009-10. Residential & Industrial category has the maximum energy consumption.
Figure 7: Past 5 years' Energy Sales
2000 1800 1600 1400 1200 MU's 1000 800 600 400 200 0 Residential FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 973 1078 1185 1316 1428 Commercial 310 348 407 463 508 Industrial LT 357 388 432 446 472 PWW 102 107 119 133 145 Agriculture 743 723 746 817 909 Street Light 46 50 53 57 59 Industrial HT 1327 1553 1618 1839 1877 Railway 266 280 305 329 358 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10
3.3.3 The growth in the sale of power for different categories over a period of 5 years i.e. from FY 2005-06 to 2009-10 and over duration of one year i.e. from FY 2008-09 to 2009-10 is given below. It is the Residential, Commercial & Agriculture categories which have shown an increase in the consumption of Energy. Whereas for Industrial HT growth in energy sales has been very low last year which is mainly due to introduction of competition in the sector and recovery impact from recession.
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Table 4: Past Years Sales Growth Rate
Sales (MU) Low Tension Consumers Residential Commercial Industrial LT Public Water Works Agriculture Street Light LT Total High Tension Consumers Industrial HT Railway Traction HT Total TOTAL
5 years CAGR FY 10 over 06 10.07% 13.14% 7.23% 9.19% 5.17% 6.42% 8.60% 9.06% 7.71% 8.83% 8.69%
3 years CAGR FY 10 over 08 9.78% 11.72% 4.53% 10.39% 10.38% 5.51% 9.40% 7.71% 8.34% 7.81% 8.77%
FY 10 over FY 09 8.5% 9.7% 5.8% 9.0% 11.3% 3.5% 8.9% 2.1% 8.8% 3.1% 6.6%
3.4
Reduction in distribution losses
3.4.1 Various practices regarding distribution loss reduction adopted by the utility has made it possible to achieve a low distribution loss level of around 13% in FY 2009-10 from distribution loss level of 21% in 2005-06 which is very efficient compare to other State Utilities who have a distribution loss of around 30%. 3.4.2 The state government bifurcated the rural supply and provided the domestic consumers 24_hour power supply on a single phase, while the private tube wells (PTW) were given 8-hour continuous supply for irrigation on a three-phase line. The three-phase line for irrigation helped save power too, as the high-current lines tripped every time anyone attempted to hook on to them illegally. 3.4.3 Apart from bifurcating the rural supply, the Gujarat government went step further and installed specially designed transformers which trip to draw electricity from a three phase line. 3.4.4 Given below is a graph depicting reduction in distribution losses over the last five years. During FY 2009-10, due to poor monsoons the company had to provide more hours of power supply to Agricultural feeders, and therefore the losses increased in comparison to the year 2008-09.
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Figure 8: Reduction in Distribution Losses
25 Distribution Loss % 20
21.33 14.85
15 10 5 0 2005-06 2006-07
13.9
12.98
13.08
2007-08 %Dist Loss
2008-09
2009-10
3.4.5 Activities undertaken by MGVCL to control loss are as outlined below: 3.4.5.1 Technical Loss reduction Activities are planned as under: a. Reconductoring of Overhead HT Line The copper conductor as well as deteriorated conductor in coastal, chemically polluted areas is replaced with appropriate size of new AAA conductor. The old replaced conductor is re-cycled and re-used and converted into Aerial Bunch cable. The RABBIT/DOG conductor is used wherever the ampere loading of feeder is more than 100 Amp, lengthy feeder % HT VR is high. This re-conductring has considerably reduced the technical losses. b. Bifurcation of Feeders To reduce the technical losses as well as to maintain the tail-end voltage regulation, the lengthy feeder and overloaded feeder having more than 150 Amp. Loading is further bifurcated. This has reduced the technical losses and improved the voltage profile. c. Load Balancing Due to Jyoti Gram Yojana, the Mix feeder consisting of irrigation pump load and lighting load is separated in two categories of feeders i.e Jyoti Gram feeder (3 x 24 hrs power supply) and Ag Dom feeder (8 hours 3 phase power supply and 16 hours 1 phase power supply). Because of that, most of the Transformers were having un-balance lighting load i.e. on two phases. Therefore to reduce the Technical losses, the Transformers are balanced by measuring peak hour loading. All the distribution transformers in urban areas as well as on industrial feeders April 2011 Page 29
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are provided with electronic meter, the load profile of each transformer is studied and accordingly load balancing of each phase is done. This has reduced the transformer failure as well as improved the voltage profile on each circuit, which has led to reduction in technical losses. Optimum size of Transformers Each transformer load profile is studied and if the connected load on the transformer is found less or more than the KVA capacity of the transformer, the transformer is immediately either de-augmented or augmented. This has saved the technical losses of the transformer and also improves voltage profile. Low Loss Transformer Since last 5 years, the low loss transformers of various capacities are also used by company. For the small capacity transformers used in rural areas, as well as where single phase power supply is given, the low loss transformers are used, which has saved the no load losses. High Voltage Distribution System (HVDS) 5430 HVDS is being implemented in MGVCL to reduce hooking in rural areas as well as to reduce the LT line losses. In order to implement HVDS system, sum of contracted load of feeders and sum of connected KVA of each TC is worked out and if there is an exorbitant difference between these two, de-augmentation of the transformer is recommended by way of providing appropriate capacity of Transformer in accordance with contract load. MGVCL has already installed about 1826 Nos. of 5 KVA single phase transformer for Zupadpatti, Kutir Jyoti, suburbs and small clusters areas. The company has also purchased 10 KVA, 16 KVA, 25 KVA Transformers for giving power supply to individual agricultural connections under the Special Scheme, KHUSHY (Kisan Heet Urja Shakti Yojana), i.e. HVDS. The implementation of KHUSHY (HVDS) will not only reduce the Technical Loss but also the Commercial Loss by way of reducing theft of power. Use of 11 KV XLPE U.G. Cable In view of following discrete advantages we have provided Under Ground HT XLPE cable in city area. Reduction in interruptions and thereby increasing system reliability Reduction in accidents Increase in Customer Satisfaction Enhancing the aesthetic look Reduction in I2R loss due to low resistance Automatic Power Factor Controller (APFC) MGVCL has installed 7922 Nos of Automatic Power Factor Controller (APFC) Page 30
d.
e.
f.
g.
h.
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panels of various capacities are installed on Distrubution Transformers covering 250 Nos. Of 11kV Feeders. APFC panels are used for improvement in Power Factor, thereby reducing reactive Power. Auto Power Factor Controllers are capable to switch ON and OFF the capacitors in stages and automatically maintain the desired power factor. The APFC will improve the supply voltage to the consumer as well as reduce the reactive component. This will lead to reduction in line current, which in turn, will enhance the capacity of the feeder. 11 kV Line Capacitor Under the US-AID Drum Project, 25 Nos. of 600 KVAR line capacitors are purchased and installed in urban as well as industrial feeders. The result before and after installation of line capacitors is encouraging as considerable reduction in line current is observed. This enabled us to accommodate additional number of HT connections without enhancing the capacity of line or transformer at substation end, which eventually generated additional revenue for the company. The 11 KV line capacitors have also helped in maintaining power factor as stipulated under GERC Regulations. Feeder managers are appointed even at corporate level to achieve the results within a set time frame to reduce losses CRGO transformers are replaced by energy efficient amorphous transformers in order to reduce technical losses on distribution side Replacement of old/ deteriorated conductor by PVC coated conductors Reduction of HT/LT ratio: LT line is reduced by providing low capacity transformers in the identified areas i.e. to maintain technically acceptable level of HT:LT ratio & to bring down technical losses.
i.
j. k. l. m.
3.5
Consumer base
3.5.1 Given below is a graph depicting the number of consumers across different categories for the year 2005-06 to 2009-10. The majority of the consumers are in the residential category followed by the commercial one.
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Figure 9: Past 5 Years Consumer Base
Residential Agriculture 100% 95% 90% 85% 80% 75% FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 Commercial Street Light Industrial LT Industrial HT PWW Railway
3.5.2 Underlying is a table depicting the growth rate of consumer categories for a period of 5 year, 3 year & 1 year resp. There is a sharp growth in case of agricultural consumers which shows that all new connections are released through metering which will in turn ensure reasonable & accountable energy supply to agricultural consumers.
Table 5: Past Years' Consumer Growth Rate
No. of Consumers Low Tension Consumers Residential Commercial Industrial LT Public Water Works Agriculture Street Light LT Total High Tension Consumers Industrial HT Railway Traction HT Total TOTAL
5 years CAGR 3 years CAGR FY 10 over 06 FY 10 over 08 6.97% 3.14% 4.00% 6.33% 3.96% 7.76% 6.44% 7.90% 0.00% 7.85% 6.45% 4.26% 1.44% 1.94% 3.44% 2.92% 5.97% 3.91% 4.51% 0.00% 4.49% 3.91%
FY 10 over FY 09 6.1% 1.7% 4.1% 10.2% 7.5% 20.5% 5.7% 6.8% 0.0% 6.7% 5.7%
3.6
Power Purchase
3.6.1 The following figure shows the per unit rate of power purchase for MGVCL during the last 5 years. As can be seen from the figure, per unit rate has increased significantly.
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Figure 10: Past 5 Years' per unit Power Purchase Rate
4.00 3.00 2.00 1.00 0.00 2006 2007 2008 2.46 2.70 2.80
3.37
3.17
Cost per unit (Rs/ Unit)
2009
2010
3.7
Support from GoG in past 5 years
3.7.1 GoG provides the agricultural subsidy to the four Discoms i.e. DGVCL, PGVCL, UGVCL and MGVCL in proportion to their respective percentage share in agricultural consumption to compensate for the revenue loss due to subsidized category of consumers as well as for unmetered consumption. The total amount of subsidy released each year is Rs 1100 Cr which is allocated as stated above.
Table 6: Past 5 Years' Agriculture Subsidy Support provided
Agricultural Subsidy (Rs Cr)
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
78.85
54.73
54.41
76.01
78.03
3.8
Operating Indices
3.8.1 As per GERC (Standard of Performance of Distribution Licensee) Regulations, issued by the Honble Commission on 31st March 2005, it has been directed that MGVCL shall calculate the reliability of his distribution system on the basis of number and duration of sustained interruptions in a year, using the following indices:A. System Average Interruption Frequency Index (SAIFI); B. System Average Interruption Duration Index (SAIDI); and C. Momentary Average Interruption Frequency Index (MAIFI)
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Table 7: Operating/ Reliability Indices
Reliability Indices SAIFI SAIDI MAIFI
FY 2007-08 3.29 16 15.71
FY 2008-09 2.59 18.75 17.15
FY 2009-10 3.35 23.67 22.82
3.8.2 System Average Interruption Frequency Index (SAIFI) is the average number of times that a consumer is interrupted during a specified time period. It is determined by dividing the total number of consumers interrupted in a time period by the average number of consumers served. The resulting unit is "interruptions per consumer". As seen in the above table, the interruptions per consumers reduced in FY 2008-09 but again due to climatic conditions (poor monsoons) increased in FY 2009-10. 3.8.3 System Average Interruption Duration Index (SAIDI) measures the average duration of interruptions for the average consumer. It is the ratio of the annual number of interruptions to the number of consumers. As seen in the above table, the duration of interruptions per consumer has increased, mainly due to poor monsoons 3.8.4 Momentary Average Interruption event Frequency Index (MAIFI) measures the average momentary interruption events per consumer. It is the ratio of the annual number of momentary interruptions to the number of consumers. As seen in the above table, the interruption per consumer has increased, mainly due to poor monsoons. Distribution transformer failure rate
3.9
3.9.1 The figure given below shows there is a significant reduction in the distribution transformer failure rate over the last 5 years and it has reduced to 5.06% for the year 2009-10. The reason behind this is reduction in low voltage profile, conversion of LVDC to HVDS, vigorous transformer maintenance, maintenance of LT Lines, providing breezer and lighting arrestor, etc. Currently 121 transformers are covered under DTC review.
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Figure 11: Reduction in DTR Failure rate
14 DTR failure rate % 12 10 8 6 4 2 0
13.01 9.6 9.68 6.11
5.06
2005-06
2006-07
2007-08
2008-09
2009-10
%Distribution Transformer Failure failure
3.10
Employee Rationalization
3.10.1 The total number of employees in MGVCL as on 31st Mar, 2010 was 6208. Out of which 3605 were technical & the rest 2603 were non technical staff. Given below is a graph depicting Class wise break-up of the technical as well as the non-technical staff.
Figure 12: Class- Category wise Employee Breakup
Tech
231 292
881
2201 I II III
Non Tech 33 88
2047
435
IV
1000
2000 No. of Employees
3000
4000
3.10.2 Employee Expenses per unit power sold The figure given below shows the employee expenses per unit power sold for the last 5 years. Employee expenses are quite high here due to a large workforce which is at MGVCL from restructuring.
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Figure 13: Past Years' Employee's expenses per unit power sold
Employee Costs/Unit Sold 0.50 0.40 Rs/ Unit 0.28 0.30 0.20 0.10 0.00 FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 0.45 0.34 0.35 0.41
3.10.3 The following figure compares the employee expenses per unit power sold across various Discoms in India. Compared to other Discoms in Gujarat as well as some of the Discoms in other states, the employee expenses for MGVCL are on a slightly higher side. Approved Employee cost (Rs/Unit) for FY 2009-10 for states other than Gujarat are taken from their Tariff Orders.
Figure 14: State wise Comparison of Employee Expenses per Unit Power Sold
0.45 0.41 0.35 0.30 0.26 0.20 0.15 0.10 0.05 0.00
PGVCL UGVCL DGVCL MGVCL MSEDCL JdVVNL JVVNL AVVNL DVVNL MVVNL PVVNL PooVVNL CSPDCL
0.40
0.43
0.40
0.22
0.26
0.26
0.25
0.30
0.33 0.19 0.17 0.20
3.11
Revenue Realized from sale of Power Vs Average Cost of supply
3.11.1 The figure given below shows the revenue realized per unit of electricity sold (excluding government grant & subsidies & revenue from other income) in comparison with the average cost of supply for the last 5 years.
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0.22
MGVCL
Figure 15: Past 5 Years' Revenue realized Vs Average Cost of Supply
Revenue Per unit Average Cost of Supply revenue realized as a % of CoS 6.00 5.00 4.00 3.00 2.00 1.00 2005- 06 2006- 07 2007- 08 2008- 09 2009- 10 91% 92% 91% 95% 95% 3.82 3.48 4.10 3.79 4.26 3.87 4.83 4.57 4.76 4.51
3.12
Demand Side Management MGVCL is a leading power distribution company in Central Gujarat with varied consumers like Agricultural, Domestic, Commercial and Industrial. Gujarat is mainly dependent on Thermal Power i.e. Coal for its electricity power generation. MGVCL as a power distribution utility has a long ranging aim to reduce its carbon foot printing. MGVCL has taken tremendous and remarkable steps to reduce energy consumption by increasing end use efficiency. Sine 1-06-05 with the setting of ALDC, the pattern of load demand is studied hourly, daily and on monthly basis to examine the type of load and its effect on MGVCL system. A brief summary of the steps undertaken to manage the demand and reduce it as far as possible are as follows:
3.12.1 In its efforts to reduce the environmental carbon, MGVCL has replaced all tube lights in its all offices from conventional choke tube light to T5 energy conservation tube lights. Currently, no offices of MGVCL use incandescent bulbs. 3.12.2 MGVCL further planned to use solar energy for its own office. MGVCL has planned a pilot project of installing roof type solar powers in its five sub-division offices, thereby reducing its own usage of electricity. 3.12.3 Reducing Co-Incidental Peak Load Providing different time slots to Agricultural Consumption by doing regrouping. For this existing 4 groups of G1, G2, H1, H2 were bifurcated into 8 groups in such a way April 2011
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that no group had maximum load not more than 100 MW at any time of the day or season. Further district wise regrouping was done by forming smaller group of 50 MW load in each group & further smaller groups of 20 MW each. Hence correct assessment of actual agriculture demand has been done resulting in the formation of a smooth and considerably flat load curve. Correct assessment of Agricultural demand is done by creating pure Agriculture & Agriculture dominant feeder. 3.12.4 Power Factor Correction Providing capacitor at the inductive load end and regular checking of installation for the same. Power factor penalties for low PF of HT consumers are introduced. Automatic Power Factor Correction Panels: APFC Panels introduce capacitance in the system as per the requirement of the system by switching on the capacitors. This improves the power factor of the system & reduces the current in the system. This is an effective measure for reducing technical losses 3.12.5 MGVCL has long range aim to reduce its own carbon foot printing as far as possible without compromising on services rendered to its consumers.
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4. Financial Performance Analysis In this section, the financial statement of MGVCL have been reviewed and evaluated to understand the financial health of the company and to enable more effective decision making. 4.1 Revenue Statement Analysis Following is the Discoms Profit & Loss statement for the last 5 years:
Table 8: Profit & Loss Statement FY 2005-06 to 2009-10
FY 2005-06 Particulars INCOME Revenue from Sale of Power Revenue Subsidies and Grants Other Income TOTAL INCOME EXPENDITURE Purchase of Power Repairs and Maintenance Employee Costs Administration and General Expenses Other Miscellaneous Expenses Depreciation Interest and Finance Charges Sub-Total Less: Other Expenses Capitalised Sub-Total Extra-ordinary items Net Prior Period Expenses / (Income) TOTAL EXPENDITURE PROFIT /(LOSS) BEFORE TAX Tax Expenses / (Income) Net Profit / (Loss) after Tax available for appropriation Units Sold (Mus) Revenue Per unit Average Cost of Supply [Rs in Crs.] 1,435 101 50 1,587 1,342 34 117 21 1 35 67 1,616 43 1,574 0 1,574 13 -4 17 4,124 3.48 3.82 % 90.5% 6.4% 3.1% 100.0% 84.6% 2.2% 7.4% 1.3% 0.1% 2.2% 4.2% 101.9% 2.7% 99.2% 0.0% 0.0% 99.2% 0.8% -0.3% 1.1% FY 2006-07 [Rs in Crs.] % FY 2007-08 [Rs in Crs.] % FY 2008-09 [Rs in Crs.] % FY 2009-10 [Rs in Crs.] % CAGR % FY 06-10 16% -6% 15% 15% 14% 1% 19% 15% 116% 25% 5% 15% 4% 15% -100% 67% 15% 16% -16% -1% 9% 7% 6%
1,716 91.1% 58 3.1% 111 5.9% 1,885 100.0% 1,516 80.4% 39 2.1% 204 10.8% 31 1.6% 1 0.1% 48 2.5% 62 3.3% 1,901 100.9% 45 2.4% 1,856 98.5% 0 0.0% 2 0.1% 1,858 98.6% 27 1.4% 10 0.5% 17 4,527 3.79 4.10 0.9%
1,881 90.5% 58 2.8% 139 6.7% 2,077 100.0% 1,718 82.7% 38 1.8% 167 8.0% 32 1.5% 1 0.1% 59 2.8% 65 3.1% 2,081 100.2% 41 2.0% 2,040 98.2% 0 0.0% 33 1.6% 2,074 99.8% 4 0.2% 1 0.1% 2 4865 3.87 4.26 0.1%
2,469 94.4% 76 2.9% 69 2.6% 2,614 100.0% 2,254 86.2% 33 1.3% 188 7.2% 34 1.3% 11 0.4% 70 2.7% 73 2.8% 2,662 101.8% 54 2.1% 2,607 99.7% 0.0% 1 0.0% 2,608 99.8% 6 0.2% 1 0.1% 5 5400 4.57 4.83 0.2%
2,597 94.0% 78 2.8% 87 3.1% 2,762 100.0% 2,287 82.8% 36 1.3% 237 8.6% 36 1.3% 22 0.8% 84 3.0% 80 2.9% 2,782 100.7% 50 1.8% 2,732 98.9% 0.0% 7 0.3% 2,739 99.2% 23 0.8% 6 0.2% 17 5,756 4.51 4.76 0.6%
4.1.1 Sale of Power Units sold have increased by 9% over the last 5 years whereas the revenue has increased by 16%. This is mainly due to increase in tariff & cost-plus mechanism adopted by GERC whereby there is an increase in cost also. The major increase in sales was in FY09, as the demand was witnessing a boost due to recovery phase from the global recession period faced by all the major countries in the world
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4.1.2 Total Revenue The total revenue comprises of revenue from sale of power, subsidies & grants. It has witnessed a CAGR of 15% wherein revenue from sale of power has witnessed a CAGR of 16%. Revenue from sale of power is around 94% of the total revenue which shows that the other income and revenue from grants doesnt impact the profitability of the company and only revenue from core sale of power to the consumers is affecting the liquidity position. The % revenue from subsidy and grants in total revenue is declining and has shown a negative CAGR of 6% because of the capping on subsidy of Rs 1100 Cr from GoG. The total revenue has shown a CAGR of 15% whereas the net PAT has witnessed a negative CAGR of 1%, hence the profitability of the company has been declining over the past years 4.1.3 Power purchase expenses As common to all the distribution utility, Power Purchases expenses has the major proportion in the total cost of the MGVCL. It almost contribute around 82% to 85% of the total income earned incurred by MGVCL. The power purchase cost has increased at a CAGR of 14% in last 5 years. The increase in the Power purchase cost is more or less in proportion to the increase in the total revenue which is around 15% which has offset the major impact of the Revenue hike in the profit and loss statement. The market rate of power in last year has witnessed a major increase in cost per unit which is in the range from Rs. 5 per unit to Rs. 12 per unit on short term procurement basis. The power purchase cost has increased almost by 14% in last 5 years due to increase in demand and the purchase of power from the open market at available cost to meet the demand supply gap for the state and mitigate the load shedding. However, the procurement of power is undertaken by GUVNL, the allocation of power is as per the consumer mix of the region vis-a-vis availability in the market. GUVNL is considered to have one of the best power procurement plan with least cost impact on the DISCOMs. 4.1.4 Operation and Maintenance Expenses O&M expense is the second prime expenses after power purchase cost. The O&M expense accounts for about 8 10% of the total income earned by MGVCL.
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The proportion of Repair & Maintenance expenses and Administrative & General Expenses is only about 2.6% of the total income earned whereas 8.6% is towards employee expenses. R&M expenses are decreasing from FY 2008-09 due to efficient management of distribution infrastructure system and have shown a CAGR of 1%. The increase in A&G costs are due to the increase in fees and subscription charges, Expenses on Computer Billing & EDP Charges, security expenses. The major reason for the increase in O&M cost is the Employee Costs. The employee cost has increased with a CAGR of 19% over the last 5 years due to revisions in pay as per 6th pay Commission recommendations.
4.1.5 Other Miscellaneous Expenses Other Miscellaneous expenses consists of small & low value items written off, written down value of assets scrapped, bad & doubtful debts written off, miscellaneous losses, deferred revenue expenses written off. The expenses in this category have witnessed 116% CAGR over the last 5 years. 4.1.6 Depreciation Depreciation as an expenses are around 3% of the total income. The depreciation has been increasing from FY 2006-07 due to the commissioning of major renovation and modernization expenses and new distribution infrastructure carried out by MGVCL 4.1.7 Profit before Tax Though, the cost of supply is higher in comparison with the revenue realization from sale of power. The difference is offset by way of subsidy and other income. Hence making average rate of realisation higher than average cost of supply. In the FY 2009-10, the profit was around Rs. 23 Crs which was around 0.8% of the total income. 4.1.8 Profit after Tax PAT for FY 2009-10 is Rs 17 Crs which is 0.6% of the total income. PAT has shown a significant increase over the past years due to reduction in power purchase cost i.e power purchase cost was 82% of total income in FY 2009-10.
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4.2 Balance Sheet Analysis Given below is MGVCLs Balance sheet for the last 5 years:
Table 9: Balance Sheet FY 2005-06 to 2009-10
FY 2005-06 Particulars SOURCES OF FUNDS SHAREHOLDERS FUND Share Capital Share Application Money Reserves & Surplus Deferred Government Grants, Subsidies and Contributions LOAN FUNDS Secured Loans Unsecured Loans TOTAL APPLICATION OF FUNDS FIXED ASSETS Gross Block Less : Accumulated Depreciation. Net Block Assets not in Use Capital expenditure in progress. TOTAL FIXED ASSETS INVESTMENTS
CURRENT ASSETS, LOANS & ADVANCES
FY 2006-07 [Rs in Crs.] %
FY 2007-08 [Rs in Crs.] %
FY 2008-09 [Rs in Crs.] %
FY 2009-10 [Rs in Crs.] %
CAGR % FY 06-10
[Rs in Crs.]
0.05 267.90 17.41 97.63 0.00 0.00 549.81 932.81
0.0% 28.7% 1.9% 10.5%
0.05 267.90 34.36 252.05
0.0% 24.8% 3.2% 23.3%
0.05 267.90 36.78 237.45
0.0% 24.3% 3.3% 21.5%
212.64 30.00 242.23 353.70
15.4% 2.2% 17.6% 25.7%
242.64 0.00 259.29 475.54
16.3% 0.0% 17.5% 32.0%
734% -100% 96%
70% 0.0% 58.9% 100.0% 23.39 503.62 1081.37 2.2% 46.6% 100.0% 18.95 543.07 1104.20 1.7% 49.2% 100.0% 204.60 335.51 1378.68 14.8% 24.3% 100% 190.86 315.75 1484.08 12.9% 21.3% 100% 101% -13% 12%
968.47 141.78 826.70 0.06 59.74 886.49
103.8% 15.2% 88.6% 0.0% 6.4% 95.0%
1189.70 190.82 998.88 0.06 67.31 1066.26
110.0% 17.6% 92.4% 0.0% 6.2% 98.6%
1391.52 248.95 1142.57 0.07 72.86 1215.50
126.0% 22.5% 103.5% 0.0% 6.6% 110.1%
1679.13 319.48 1359.65 0.05 56.02 1415.73
121.8% 23.2% 98.6% 0.0% 4.1% 102.7%
1913.92 402.68 1511.24 0.39 72.41 1584.05
129.0% 27.1% 101.8% 0.0% 4.9% 106.7%
19% 30% 16% 60% 5% 16%
Inventories Sundry Debtors Cash & bank balances Loans & Advances Other current assets. TOTAL CURRENT ASSETS LESS : Current Liabilities Provisions TOTAL CURRENT LIABILITIES & PROViSIONS NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) TOTAL
85.59 209.91 54.57 15.28 94.26 459.61 403.65 40.80 444.45 15.16 24.75 6.41 932.81
9.2% 22.5% 5.9% 1.6% 10.1% 49.3% 43.3% 4.4% 47.6% 1.6% 2.7% 0.7% 100.0%
98.45 257.73 34.23 24.01 222.30 636.72 507.16 115.68 622.84 13.88 0.00 1.23 1081.37
9.1% 23.8% 3.2% 2.2% 20.6% 58.9% 46.9% 10.7% 57.6% 1.3%
107.06 314.90 28.24 28.55 113.52 592.27 562.56 141.83 704.39 -112.12 0.00
9.7% 28.5% 2.6% 2.6% 10.3% 53.6% 50.9% 12.8% 63.8% -10.2% 0.0% 0.1% 100.0%
150.95 331.84 38.11 36.04 245.30 802.24 660.88 17881.2% 839.69 -37.46 0.41 0.00 1378.68
10.9% 24.1% 2.8% 2.6% 17.8% 58.2% 47.9% 13.0% 60.9% -2.7% 0.0% 0.0% 100.0%
180.08 345.66 28.79 25.68 126.49 706.71 661.28 14539.8% 806.68 -99.97 0.00 0.00 1484.08
12.1% 23.3% 1.9% 1.7% 8.5% 47.6% 44.6% 9.8% 54.4% -6.7% 0.0% 0.0% 100.0%
20% 13% -15% 14% 8% 11% 13% 37% 16%
-100% -100% 12%
0.1% 100.0%
0.82 1104
4.2.1 Fixed assets and Capital under Construction In the last 5 years, Net Fixed Assets have grown at a CAGR of 16% due to the augmentation of distribution system carried out by MGVCL to cater the load growth in the area to improve the quality of power supply. Overall the fixed assets including CWIP has witnessed a CAGR of around 16% whereby only 5% of the total assets is CWIP which suggest that MGVCL is able to execute and commission the distribution project on time. April 2011 Page 42
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The CAPEX plan undertaken includes re-enforcement of the system to provide quality, security and availability of power supply to the consumers, to undertake system development to meet the load growth, achieving the targeted reduction in system losses, undertake automation and other improvement works to enhance customer service. Some of the distribution schemes that are in progress in MGVCL are Kutir Jyoti, Jyotigram, Nirmal Gujarat. Automatic p.f. control panel. Other new schemes include Arial bunch conductor/ underground cables, Automatic meter reading, GIS. Automation & computerization etc.
4.2.2 Net Current Assets Net Current Assets or the requirement of the working capital has shown a tremendous decrease & the year-on-year growth rate has been negative recently which is due to the expansion in the operation of the business, low credit period available for payment against the power purchase, increase in the O&M cost, etc. The Net Current Assets have been negative past years due to decrease in other current assets comprises of Income accrued but not due, Amt. recoverable from employees/ex-employees, Interest Accrued & Due on Staff Loans & Advances. Receivables from Government - Primary School, Other Misc. Receivable from Govt Dept, Local Bodies, Deposits, Other receivables from Associate Companies including GSECL, other Discoms, GETCO, GUVNL and GETRI. Also, current liabilities are witnessing a CAGR of around 16% affecting the working capital requirement. The major portion in the current assets is the Sundry debtors (receivables against supply of power) which have almost been around 50% of the Total Current Assets and around 25% to 30% of Total Assets. Though the Sundry debtors are witnessing a CAGR of around 13%, MGVCL has been able to control the default in collection due to efficient collection management and have a collection efficiency of around 100%. The proportion of Current Liabilities to Total Assets has remained almost the same i.e. 44% to 50%. 4.2.3 Equity in line with Debt To carry out the capacity expansion plant, Equity of the company has increased subsequently. Due to such expansion plans, a Consumer contributions / grants / subsidies increased by 32% last year whereas the Share Capital has witnessed a growth of around 16.3%. GoG has issued a notification dated 12th December 2008 modifying the earlier notification dated 3rd October 2006, whereby bifurcating the earlier notified entry April 2011 Page 43
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share capital into equity share capital and share premium w.e.f 1st April 2008. As can be analysed, debt:equity ratio has been decreasing since FY 2008-09 when share capital was infused and therefore the ratio is around 0.52 in FY 2009-10 which is considered to be a low leverage and hence a financially sound company. Ratio Analysis The financial Ratio analysis of MGVCL is given below:
Table 10: Financial Ratio Analysis FY 2005-06 to 2009-10
Ratios Operating Cost to Sales Operating Cost to Total Revenue PBT to Sales Return on Equity - (Pre-Tax) Return on Capital Employed Debt:Equity Current Ratio Receivables in proportion to Total Revenue Payables in proportion to Total Cost Debtors Collection period Formula (PP Cost + O&M)/ Sales (PP Cost + O&M)/ Total Revenue PBT / Sales PBT / Equity PBDIT/(Debt+Equity) Debt / Equity Current Assets / Current Liabilities Receivables / Total Revenue Payables/ Total Cost Debtors/ Total Revenue * 365 FY 06 102.51% 93% 1% 3% 12.2% 1.44 1.14 13% 26% 48.29 FY 07 101.71% 93% 2% 5% 12.6% 0.95 1.26 14% 27% 49.91 FY 08 101.82% 92% 0.2% 1% 11.6% 1.04 1.05 15% 27% 55.33 FY 09 99.40% 94% 0.2% 1% 10.8% 0.64 1.21 13% 25% 46.34 FY 10 98.03% 92% 1% 2% 12.6% 0.52 1.07 13% 24% 45.68
4.3
4.3.1 Operating Cost to Sales Ratio Although the operation cost to sales is around 100%, revenue subsidies and other income offsets the effect of higher operating cost which can be seen in the next ratio of operating cost to total revenue. The operating cost to total revenue ratio has been almost consistent around 92% to 94% throughout the period FY06 to FY 10. This depicts the dependence of MGVCL on GoG for grant & subsidy and other income. 4.3.2 PBT to Sales Ratio The PBT to Revenue ratio has decreased during the last 4 years period. The reasons for the same are increased power purchase cost, increased employee costs and high depreciation. But in FY 2009-10 it increased due to lower power purchase cost. 4.3.3 Return on Equity - (Pre-Tax) Ratio As per the GERC (Terms & Conditions of Tariff) Regulations, 2005, the norm related to return on Equity entitles the generating business the RoE of 14%. However, as the actual performance is not matching upto the performance levels fixed by the Commission, the Return on Equity (Pre-Tax) has been excessively low. April 2011 Page 44
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4.3.4 Return on Capital Employed Ratio The return on capital employed has been almost consistent in the range of 11% to 13% during last 5 years. 4.3.5 Debt Equity Ratio Ideal debt equity is expected to be 2.33%. However in MGVCL case, the proportion of equity is more than debt since last 3 years due to fusion of share capital. As the debt: equity ratio is lower than generally accepted industry benchmark, the company can leverage the existing balance & hence has greater ability to borrow funds. 4.3.6 Current Ratio The current ratio was higher in the initial period but has shown a decreasing trend and for FY10 it reached to 1.07. This indicates that liquidity position of the company needs to be improved to meet the quick liquidity requirement to meet the operation of the business. 4.4 Analysis of Capital Expenditure
4.4.1 Capital expenditure incurred by the MGVCL in FY 2009-10 was Rs. 251 Crores. The actual capital expenditure by MGVCL during the FY 2009-10 is Rs 63 Crores lower than that approved by the Honble Commission. The scheme-wise capital expenditure incurred in FY 2009-10 against approved by the Honble Commission is as shown below.
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Table 11: Capital Expenditure FY 2009-10
Rs in Crores Sr. No. A Schemes Distribution Schemes Normal Development Scheme System Improvement Scheme Electricity of Hutments Kutir Jyoti Scheme Trible Villages Total Rural Electrification Schemes TASP (Wells and Petapara) Special Component plan RE Normal Wells Total Others Energy Conservation Sagar Khedu Total Non Plan Schemes SCADA RAPDRP (Part A) RAPDRP (Part B) RGGVY DRUM Total New Innovative Schemes Line Capacitors Aerial Bunch Conductors HVDS in selected sub-division Automatic meter reading GIS in cities Automation and Computerization Customer Care Centre Under Ground Cables Replacement of Conductors/TC Misc. Civil + Electrical Works Other New Schemes Total Other Schemes Urban Development Govt. School Electrification (General) Total Capital Expenditure Total FY 2009-10 (Approved) 37 9 21 11 78 62 0 30 92 3 2 5 4 25 12 10 51 2 20 21 5 1 0 17 3 14 4 85 4 0 4 314 FY 2009-10 (Actual) 40 5 1 4 50 95 20 2 117 3 2 5 4 7 4 2 18 17 17 0 5 2 13 4 59 1 1 2 251 Deviation (3) 4 20 7 28 (33) (20) 28 (25) (0) 0 (0)
18 7 8 32 2 3 3 5 1 0 12 1 0 (0) 26 3 (1) 3 63
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5. Power Sector Overview
5.1
Industry Overview
5.1.1 India in the emerging markets has been one of the fastest growing economies. The Indian economy has posted more than 9% growth for three years consecutively and has seen a decade of more than 7% growth consistently. Energy requirement and supply is a strategic input and one of a key mover for economic and social development behind any growing country. As energy plays a very vital role in industrial production and common mans life, it has become extremely essential to boost the growth in energy segment for the growth of the country. 5.1.2 With the growing demand in energy requirement, the annual per capita energy consumption has grown significantly. The low per capita consumption of electric power in India compared to the world average presents a significant potential for sustainable growth in the demand for electric power in India. According to the 17th Electric Power Survey (EPS), May 2007, Indias peak demand is expected to grow at a CAGR of 7.6% over a period of 10 years (FY 2007 to FY 2017) and would require a generating capacity of 300,000 MW by 2017. To cater to this demand compared to an installed capacity of 159399 MW as on March 31, 2010. 5.2 All India Installed Capacity
5.2.1 The all India Region wise generating installed capacity (GW) of Power Utilities is given hereunder:
Figure 16: All India Installed Capacity
2 2 25
5 2 8 1 36 23 0.33 17
Renewable Nuclear Thermal Hydro
13 North - 42 GW
7 West - 50 GW
0.21 11 South - 43 GW 4 East - 21 GW 1.12
1.04
North East - 2.4 GW
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5.2.2 India has the fifth largest generation capacity in the world with an installed capacity of 159 GW as on 31st March 2010, which is about 4 percent of global power generation. The top four countries, viz., US, Japan, China and Russia together consume about 49 percent of the total power generated globally. The average per capita consumption of electricity in India is estimated to be 704 kWh during 2008-09. However, this is fairly low when compared to that of some of the developed and emerging nations such US (~15,000 kWh) and China (~1,800 kWh). The Indian government has set ambitious goals in the 11th plan for power sector owing to which the power sector is poised for significant expansion. In order to provide availability of over 1000 units of per capita electricity by year 2012, it has been estimated that need-based capacity addition of more than 100,000 MW would be required. This has resulted in massive addition plans being proposed in the subsectors of Generation Transmission and Distribution. 5.2.3 The western region accounts for ~32% of the total installed capacity in the country out of which Gujarat contributes around 35% of total available installed capacity of Western Region. Installed capacity from coal, accounts for around 53% of the countrys total installed capacity. The break-up of various fuels in the total generation capacity of India is shown below:
Figure 17: Fuel wise breakup of generation capacity in India
10% 23% 53%
3% 1% 10%
Coal
Gas
Diesel
Nuclear
Hydro
Renewables
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5.2.4 Historically, India has experienced shortages in energy and peak power requirements. Peak deficit averaged 12.8% and energy deficit averaged 9.02% during FY 2003 to FY 2010. The shortages in energy and peak power have been primarily due to the slow pace of capacity addition and the growing demand.
Figure 18: All India past Years' Power deficit
Peak Deficit (%) 16.60% 12.20% 8.80% 7.10% 11.20% 11.70% 7.30% 12.30% 8.40% 13.80% 9.60% 9.90% 11.00% 12.00% 13.30% 10.10%
200203
200304
200405
200506
200607
200708
200809
5.3
Actual Power Supply Position in India
5.3.1 The demand supply for electricity has increased manifold, despite significant overall progress in the power sector, there has been a significant gap between demand and supply. The Peak deficit and Energy Deficit for the FY 2009-10 is outlined in the figure below:
Figure 19: Region wise Peak deficit in FY 2009-10
15%
14% 18%
12%
9%
11%
18%
6%
254 NR
259 WR
221 SR
5%
88 ER Peak Deficit (%)
9 NER
830 Indi a
Energy Demand (BU)
Energy Deficit (%)
5.3.2 Western and Northern regions are the major contributors to deficit. Western Region contributes about 18% of peak deficit and 14% of energy deficit in the country which is highest in compare to other region. Rural electrification & economic growth has April 2011
10%
8%
13%
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put power infrastructure under stress. 5.4 Power Sector in Gujarat 5.4.1 As per the enactment of the Electricity Act, 2003 and the Gujarat Electricity Industry (Reorganization and Regulation) Act, 2003, Government of Gujarat transferred the assets, liabilities, proceedings and personnel from Erstwhile Gujarat Electricity Board (GEB), into six successor transferee Companies i.e. one Generation Corporation, one Transmission Corporation and four Distribution Companies through various Notifications, Government Resolutions and Transfer Schemes. These successor transferee Companies are: a. Gujarat State Electricity Corporation Limited (GSECL) - (A Generation Company) b. Gujarat Energy Transmission Corporation Limited (GETCO) - (A Transmission Company) c. Four Distribution Companies: o Dakshin Gujarat Vij Company Limited (DGVCL) o Madhya Gujarat Vij Company Limited (MGVCL) o Uttar Gujarat Vij Company Limited (UGVCL) o Paschim Gujarat Vij Company Limited (PGVCL) 5.4.2 As per resolution of Government of Gujarat, a new company named Gujarat Urja Vikas Nigam Ltd. (GUVNL) was incorporated in December, 2004 to carry out the residual functions (including power trading) of the erstwhile GEB. 5.4.3 Apart from these there are two private distribution licensees in the state of Gujarat: Torrent Power Ltd. has license to distribute the power in Ahmadabad, Gandhinagar and Surat. Torrent has a generation capacity of 1647.5 MW and distributes power to more than 2 million customers annually in Ahmadabad, Gandhinagar, Surat. Kandla Port Trust distributes the power in Kandla Port area. It purchases around 8 MUs from GUVNL at Bulk Supply tariff rates and supplies to consumers in Kandla Port Area. 5.5 Installed Capacity available to Gujarat The state has access to a total installed capacity of around 13,908 MW. The split up of installed capacity in the state as on March 2010 is as per the fuel and owned by is provided below:
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Figure 20: Installed Capacity in Gujarat
1509 1310 424 4190 772 Hydro Coal 2578 893 Gas 17 Diesel 559
CENTRAL PRIVATE State
1626 30 RES
Nuclear
5.5.1 Gujarat Urja Vikas Nigam Ltd. had signed power purchase agreements for about 1300 MW of solar energy, the highest in India's solar power sector. After having successfully allotting 716 MW of solar power generation capacity to 34 national and international project developers in the first round, Gujarat government has allotted another 565 MW capacity to various power project developers. The government has initiated efforts to achieve 1,000 MW solar installations by the end of the year 2012 and 3,000 MW in the subsequent five years. The Gujarat Electricity Regulatory Commission (GERC) has fixed Rs.15/- per unit of power produced from solar PV panels and Rs.11/- for solar thermal power generation for the initial 12 years of power production. 5.6 Power Supply Position of Gujarat
5.6.1 In the past, there has been a consistent gap in the peak demand and peak met as well as in energy terms in the state. The state has been unable to meet the evergrowing demand due to industrial and economic growth of the state. Although the state is still facing the peak deficit, after serving the off peak demand the GUVNL remains with some surplus power. GUVNL sells the surplus power and earning good amount of profit. The following table shows the actual power supply situation in the state for the past few years.
Table 12: Power Supply situation FY 2003-10 Peak Demand Peak Met Peak Deficit / Surplus Peak Deficit / Surplus Energy Requirement Energy Availability Energy Deficit / Surplus Energy Deficit / Surplus
Period
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2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 (MW) 8641 9820 10162 9783 11619 12119 11841 10,406 (MW) 7336 7204 7578 7610 8110 8885 8960 9,515 (MW) -1305 -2616 -2584 -2173 -3509 -3234 -2881 -891 (%) -15.1 -26.6 -25.4 -22.2 -30.2 -26.7 -24.3 -8.6 (MU) 60175 57171 59681 57137 62464 68747 67516 70,412 (MU) 53316 50292 52724 52436 54083 57614 60885 67,263 (MU) -6859 -6879 -6957 -4701 -8381 -11133 -6631 -3,149 (%) -11.4 -12 -11.7 -8.2 -13.4 -16.2 -9.8 -4.5
Source: Power Scenario at a Glance, April 2010, CEA
5.6.2 Before unbundling, it was facing heavy T&D losses, poor collection efficiency, excessive load shedding, a deteriorating and overloaded distribution network and inadequate consumer services. The disparity between demand and supply was apparent and the lack of investment in the power sector has its role in hindering any plans the company had. 5.7 Allocated Capacity to MGVCL (As on 1/10/2010)
5.7.1 There are various sources of generation from which GUVNL supplies power to the Discoms in accordance to their allocated capacity. Given below are the capacities from these generating plants which are allocated to MGVCL.
Table 13: Plant wise Allocated Capacity (As on 1/10/10)
GSECL PLANTS Gandhinagar I to IV Wanakbori I to VI Sikka TPS Utran Gas Based Utran Extension ESSAR GPEC GIPCL - I (145) NPC - Tarapur- 3&4 NTPC - KAWAS NTPC - Kahalgaon Wind Farms (3.37) Aryan Total
MGVCL 165 315 96 54 94 120 156 25 110 75 85 150 100 1,545
5.8
Power purchase for MGVCL
5.8.1 The company has been currently allocated share of generation capacities as per the April 2011 Page 52
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scheme worked out by GUVNL. In order to minimize power purchase cost, GUVNL adopts the Merit Order Despatch principles for despatching power from the generating stations based on the demand and as this power gets allocated to MGVCL. 5.8.2 During the year, based on requirement of power, the generation capacities have been allocated to MGVCL. Based on this allocation, if there is surplus of power then Distribution Company sells the power to other distribution company and if there is deficit of power then power is bought from other distribution company or from power exchange. 5.8.3 The actual power purchase from GUVNL is different from allocation because the demand from MGVCL is not constant and it varies from time to time 5.8.4 The total power purchase cost for the company for the FY 2009-10 consists of the basic power purchase cost, transmission charges payable to GETCO and PGCIL and the Discoms share of GUVNL cost. Based on the same, the comparison of the approved and the actual cost of power purchase are as shown below:
Table 14: MGVCL's Power Purchase Cost FY 2009-10
Particulars Total Power Purchase Cost
FY 2009-10 (Approved) 2,386
Rs in Crores FY 2009-10 (Actual) 2,287
5.8.5 The variation in the approved and the actual power purchase expenses is on account of various reasons including, change in cost of power, change in quantum of power purchased, consequent changes in the transmission charges payable and GUVNL cost allocation. 5.8.6 The quantum of power purchase depends upon the sales during the year as well as the losses in the system. The actual distribution losses in the MGVCL distribution network are slightly higher than the approved level and hence, the quantum of power purchased was slightly higher than the power required to be bought at the approved distribution loss level. Thus there was be an extra cost implication on account of this factor.
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6. Regulatory Framework
6.1
Background
6.1.1 As per the Constitution, the power sector in India was the combined responsibility of Central and State Government. Over the years, reforms in Indian power sector have been driven by the Union Government in an endeavour to achieve sustainable growth & improvement in operational efficiencies. One of the hallmarks of this reform Agenda is the Electricity Act, 2003 (hereinafter referred as EA, 2003 or simply the Act unless specified otherwise). 6.1.2 The power sector in the country had been guided by the Electricity Supply Act, 1948 and various rules set out there under. The entities involved in the power sector were the State Electricity Boards (SEB), electricity departments, generating companies and licensees. The SEB were integrated utilities responsible for generation, transmission and distribution of power for each of the states in the country. The generating companies were the Central Generating companies responsible for supplying power to the grid without any specific responsibility for retail distribution, for e.g. NTPC, NHPC and NPCIL. The licensees were private-sector utilities licensed by a State Government for power generation, distribution, or both within a specified area for e.g. Gujarat Industrial Power Corporation Limited (GIPCL), Bombay Suburban Electric Supply Limited (BSES) and Tata Electric Company (TEC), etc. 6.1.3 The sector over the years has grown under the aegis of State Electricity Boards, which have assumed a monolithic structure with the responsibility of generation, transmission and distribution. The sector had very limited pockets of private sector investments (specifically in generation after liberalization and opening up of generation sector to private investment and certain urban areas of distribution). The SEBs were operating under a monopolistic environment. While the SEBs, over the years has contributed to the accelerated growth in the sector, the performance of the SEB required significant improvement. 6.1.4 However, by the 1990s, the SEBs were found to be beset with unsustainable inefficiencies, unviable tariffs, high T&D losses, mounting subsidies, sub-optimal performance, wasteful practices and lackadaisical financial management. All these factors led to financial fragility of the entire sector. Due to the uninspiring financial position of the vertically integrated monolithic SEBs, the power sector was failing to attract the much-needed investments for its development. Power sector reforms
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were necessary to further the economic liberalization going on in the country. Certain policies were introduced like the Private Power Policy, Policy for setting up Mega Power Projects in Private Sector, enactment of Electricity Regulatory Commission Act, 1998. These Policies still did not have the desired impact of increasing Private generation and bringing the desired investment in the Power sector. While certain states have adopted reforms in the sector, through enactment of necessary legislation, there was a need to provide a uniform approach for the reforms and provide necessary impetus for sound, sustainable commercial growth in the sector. In order to enable the same, the Government of India has enacted Electricity Act 2003, which has paved the way for accelerated reforms, growth in the sector, and introduction of competition and efficiency in various functions. 6.2 Salient features of Electricity Act, 03 The Government of India notified The Electricity Act, 2003 with effect from 10th June 2003 requires the State Governments to initiate major changes in the Industry Structure and Operations of the state power sector. The broad objectives of the Electricity Act, 2003 as incorporated in its preamble is to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry through way of reforms and restructuring, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto. The major provisions of the electricity Act 2003 were: Thrust to complete the rural electrification and provide for management of rural distribution by Panchayats, Cooperative Societies, non-Government organizations, franchisees etc. (Sections 4, 5 & 6); Delicensing of generation and promotion of captive generation (Sections 7 & 9); Provision for license free generation and distribution in the rural areas (Section 14); Introduction of open access in transmission and distribution (Section 38(d) and 42(2) of EA 2003). The State Electricity Regulatory Commission is a mandatory requirement (Section
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82); Gradual phasing out of cross subsidy (Section 61g of EA 2003); Power procurement through competitive bidding (Section 63 of EA 2003). Provision for payment of subsidy through budget (Section 65); Trading, a distinct activity is being recognized with the safeguard of the Regulatory Commissions being authorized to fix ceilings on trading margins, if necessary. (Sections 12, 79 & 86); Reorganization of SEBs. (Sections 131); Metering of all electricity supplied made mandatory. (Section 55); Constitution of an Appellate Tribunal to hear appeals against the decision of the CERC and SERCs. (Section 111); More stringent provisions relating to theft of electricity (Section 135-150); Provisions safeguarding consumer interests. (Sections 57-59, 166), Ombudsman scheme (Section 42) for consumers grievance redressal. Thus, the Electricity Act, 2003 is a historic legislation which not only integrates the previous Act, but also goes beyond by creating a competitive environment and facilitating investment in the sector and at the same time giving due importance to consumers. 6.2.1 Features of Electricity Act, 03 providing a significant impact Among the many features in EA 2003, some are expected to have significant impact on the structure of the sector as follows: a. Generation is delicensed: The Act has delicensed and freed generation capacity addition. However hydro projects would need the approval of the state government and clearance from the Central Electricity Authority. Generators only need to meet technical standards with respect to connectivity to the grid. It is believed that this will attract interest from private sector companies, especially in case of captive power plants (definition of the Captive Power Plan includes a wide range of investors and with open access provisions, is expected to provide power at competitive rates to the captive users). Further, the nature of arrangement for sale of power contemplated under the Act provides direct access of revenues of the consumers to the generators, thereby enhancing bankability of the projects for increased investments. b. Distributed Generation: Further, under the Act no license would be required for generation and distribution in rural areas as notified by the State Government. April 2011 Page 56
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While the provision encourages rural investment in the sector, the same may need to be structured, given the characteristics of rural supplies. c. Open access to transmission lines: Open access of transmission facilities, owned by Central as well as State transmission companies, will be provided to the users, on enactment of the Act, subject to the availability of transmission capacity. The open access to the users will be provided, at specified transmission / wheeling charges. In addition, open access will be provided on levy of surcharge (which is not applicable for captive users and licensees), to meet the cross subsidy requirements in the sector. The surcharge is expected to gradually decrease within the period stipulated by SERC, with rationalization of consumer tariffs. While the open access provision is expected to enable efficiencies in generation to keep generation tariffs at competitive levels for the consumers (distribution licensees, traders and bulk consumers), efficient operation of open access would depend upon a number of factors, which would include capacity in the network, infrastructure for tracking the trades initiated through open access, system controls, balancing mechanism, etc. Further, it provides scope for release of stranded generation capacities (captives) and integration of generation and distribution business. d. Open access in distribution to be allowed in a phased manner: Akin to the open access in transmission, open access in distribution would also be provided, in a phased manner, as decided by the Regulator. While the open access in distribution is subject to surcharge and additional surcharge (fixed charge for service obligation), the provision is expected to bring in competition in the distribution business. e. Trading of Power: Trading in power, hitherto limited to PTC, traders and some SEBs is expected to be a major activity in future. Further, the trading activity is also required to be outside the Transco / SEB and would be a regulated business. Along with the new trading outfits, the distribution business (as the license provides trading activity) could compete for the trading business. The trading function is likely to bring in competition and efficiency in supply of power to licensees as well as consumers through balancing of various contracts. The trading function is also expected to provide impetus for development of power markets in India. f. Exclusivity of distribution license removed: The distribution licensee will no April 2011 Page 57
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longer have exclusive rights for the licensed area. Any company with technical and financial capability can seek license in an already licensed area and undertake distribution of electricity by way of parallel licensing. This would enable competition for the distribution business. However, the provision may lead to cherry picking of the areas for licensing, resulting in a potential threat for the existing license holders. g. State Electricity Regulatory Commission is a mandatory requirement: With establishment of SERCs, necessary regulatory framework for the power sector would be put in place. The Regulatory Commission could be mandated to provide necessary directives for development of the sector, keeping in view the concerns of all the stakeholders, to meet the overall objectives. h. Provision for payment of subsidy through Budget: The provision of payment of subsidy to the utilities in a timely manner would improve the liquidity in the sector, where subsidized structure of tariffs is in place. The state government henceforth needs to make necessary budgetary provisions for the subsidy payment to keep up the desired level of socio-economic obligations. i. Issues concerning theft and losses in the system: Metering of all electricity supplied has been made mandatory, thereby bringing in necessary energy audit and accounting systems into the sector. Further the anti-theft provisions would enable the Discoms to plug pilferage of power and enforce the penalties, to improve their operational efficiencies. j. Rural electrification: Rural electricity involves supply of energy for various production oriented activities like minor irrigation, rural industries etc. as well as for electrification of villages. A village is declared to be electrified if: basic infrastructure such as Distribution Transformer and Distribution lines are provided in the inhabited locality within the revenue boundary of the village, including atleast one Dalit Basti/ hamlet as applicable; electricity is provided on demand to public places like schools, panchayat office, health centres, dispensaries, community centers, etc; the ratings of distribution transformer and LT lines to be provided in the village would be finalized as per the anticipated number of connections decided in consultation with the Panchayat / Zila Parishad / District Administration who will also issue the necessary certificate of village electrification on completion of the works; and April 2011 Page 58
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the number of households electrified are at least 10% of the total number of households in the village.
'Rural Electrification' has been regarded as a vital programme for socioeconomic development of rural areas. It aims to trigger economic growth and generate employment by providing electricity as an input for productive uses in agriculture and rural industries. Accordingly, both the Central Government and the State Governments are making all efforts to secure electricity access to all rural households and to ensure that it reaches poor and marginal sections of the society at reasonable rates. Several programmes has been launched, from time to time, for electrification of rural areas. Some of them are:i. ii. iii. iv. v. Pradhan Mantri Gramodya Yojana (PMGY) Kutir Jyoti Scheme Accelerated Rural Electrification Programme Accelerated Electrification of One lakh Villages and One Crore Households Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)
As is observed, the provisions of the EA2003 mentioned above, have far reaching implications for the power sector and there are clear directions in the Act for reorganizing the power sector and establishing commercial relationships among themselves. It is evident from the above provisions that the EA2003 intends to create a competitive power sector in the long term and has left no choice for the state utilities but to improve their performance to face the competition from other players entering into the market. However, the Act has provided certain timelines with the Regulators subject to the national level guidelines on various issues such as Tariff Policy. 6.3 National Electricity Policy, 2005
6.3.1 Recognizing that electricity is one of the key drivers for rapid economic growth and poverty alleviation, the nation has set itself the target of providing access to all households in next five years. As per Census 2001, about 44% of the households do not have access to electricity. Hence meeting the target of providing universal access is a daunting task requiring significant addition to generation capacity and expansion of the transmission and distribution network. 6.3.2 Indian Power sector is witnessing major changes. Growth of Power Sector in India since its Independence has been noteworthy. However, the demand for power has April 2011 Page 59
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been outstripping the growth of availability. Substantial peak and energy shortages prevail in the country. This is due to inadequacies in generation, transmission & distribution as well as inefficient use of electricity. Very high level of technical and commercial losses and lack of commercial approach in management of utilities has led to unsustainable financial operations. Cross-subsidies have risen to unsustainable levels. Inadequacies in distribution networks have been one of the major reasons for poor quality of supply. 6.3.3 Electricity industry is capital-intensive having long gestation period. Resources of power generation are unevenly dispersed across the country. Electricity is a commodity that cannot be stored in the grid where demand and supply have to be continuously balanced. The widely distributed and rapidly increasing demand requirements of the country need to be met in an optimum manner. 6.3.4 Electricity Act, 2003 provides an enabling framework for accelerated and more efficient development of the power sector. The Act seeks to encourage competition with appropriate regulatory intervention. Competition is expected to yield efficiency gains and in turn result in availability of quality supply of electricity to consumers at competitive rates. 6.3.5 Section 3 (1) of the Electricity Act 2003 requires the Central Government to formulate, inter alia, the National Electricity Policy in consultation with Central Electricity Authority (CEA) and State Governments. The provision is quoted below: "The Central Government shall, from time to time, prepare the National Electricity Policy and tariff policy, in consultation with the State Governments and the Authority for development of the power system based on optimal utilization of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy". 6.3.6 Section 3 (3) of the Act enables the Central Government to review or revise the National Electricity Policy from time to time. The Ministry of Power in compliance to the section 3 of the Electricity Act 2003 notified the National Electricity Policy in February 2005 through which the legislative provisions of the EA 2003 were to be administered and implemented. 6.3.7 The National Electricity Policy outlines a plan for rural electrification and increased generation capacity. The policy states that maximum emphasis would be put on the development of hydro power. Use of thermal power could be made cleaner by April 2011 Page 60
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using low-ash coal, improving lignite mining, and increased use of natural gas and nuclear power. The policy also sets recommendations for improving the power grid with better transmission and distribution of power. It also calls for the use of the most efficient technologies and more funding for R&D. India also seeks to create a more competitive energy sector to increase private sector participation. Finally, the Policy emphasizes the need for conservation and demand-side management including a national awareness campaign. 6.3.8 The main aim of the policy was: Access of power - available for all households by year 2009; Availability of Power Eliminating power shortages by year 2012 and Energy and peaking shortages to be overcome and adequate spinning reserve to be available; Supply of reliable and quality power of specified standards in an efficient manner and at reasonable rates; Per capita availability of electricity to be increased to over 1000 units by 2012; Minimum lifeline consumption of 1 unit/household/day as a merit good by 2012; Financial turnaround and commercial viability of electricity sector; Protection of consumers interests;
6.4
National Electricity Plan Assessment of demand is an important pre-requisite for planning capacity addition. Section 3 (4) of the Act requires the Central Electricity Authority (CEA) to frame a National Electricity Plan once in five years and revise the same from time to time in accordance with the National Electricity Policy. Also, section 73 (a) provides that formulation of short-term and perspective plans for development of the electricity system and coordinating the activities of various planning agencies for the optimal utilization of resources to sub serve the interests of the national economy shall be one of the functions of the CEA. The Plan prepared by CEA and approved by the Central Government can be used by prospective generating companies, transmission utilities and transmission/distribution licensees as reference document.
6.4.1 Distribution Distribution is the most critical segment of the electricity business chain. The real challenge of reforms in the power sector lies in efficient management of the distribution sector. The Act provides for a robust regulatory framework for April 2011 Page 61
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distribution licensees to safeguard consumer interests. It also creates a competitive framework for the distribution business, offering options to consumers, through the concepts of open access and multiple licensees in the same area of supply. For achieving efficiency gains proper restructuring of distribution utilities is essential. Adequate transition financing support would also be necessary for these utilities. Such support should be arranged linked to attainment of predetermined efficiency improvements and reduction in cash losses and putting in place appropriate governance structure for insulating the service providers from extraneous interference while at the same time ensuring transparency and accountability. For ensuring financial viability and sustainability, State Governments would need to restructure the liabilities of the State Electricity Boards to ensure that the successor companies are not burdened with past liabilities. The Central Government would also assist the States, which develop a clear roadmap for turnaround, in arranging transition financing from various sources which shall be linked to predetermined improvements and efficiency gains aimed at attaining financial viability and also putting in place appropriate governance structures. Conducive business environment in terms of adequate returns and suitable transitional model with predetermined improvements in efficiency parameters in distribution business would be necessary for facilitating funding and attracting investments in distribution. Multi-Year Tariff (MYT) framework is an important structural incentive to minimize risks for utilities and consumers, promote efficiency and rapid reduction of system losses. It would serve public interest through economic efficiency and improved service quality. It would also bring greater predictability to consumer tariffs by restricting tariff adjustments to known indicators such as power purchase prices and inflation indices. The Electricity Act 2003 enables competing generating companies and trading licensees, besides the area distribution licensees, to sell electricity to consumers when open access in distribution is introduced by the State Electricity Regulatory Commissions. As required by the Act, the SERCs shall notify regulations by June 2005 that would enable open access to distribution networks in terms of subsection 2 of section 42 which stipulates that such open access would be allowed, not later than five years from 27th January 2004 to consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one mega watt. Section 49 of the Act provides that such consumers who have been allowed open access under section 42 may enter into agreement with Page 62
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any person for supply of electricity on such terms and conditions, including tariff, as may be agreed upon by them. While making regulations for open access in distribution, the SERCs will also determine wheeling charges and cross-subsidy surcharge as required under section 42 of the Act. A time-bound programme should be drawn up by the State Electricity Regulatory Commissions (SERC) for segregation of technical and commercial losses through energy audits. Energy accounting and declaration of its results in each defined unit, as determined by SERCs, should be mandatory not later than March 2007. An action plan for reduction of the losses with adequate investments and suitable improvements in governance should be drawn up. Standards for reliability and quality of supply as well as for loss levels shall also be specified, from time to time, so as to bring these in line with international practices by year 2012. Private sector participation in distribution needs to be encouraged for achieving the requisite reduction in transmission and distribution losses and improving the quality of service to the consumers. One of the key provisions of the Act on competition in distribution is the concept of multiple licensees in the same area of supply through their independent distribution systems. State Governments have full flexibility in carving out distribution zones while restructuring the Government utilities. For grant of second and subsequent distribution licence within the area of an incumbent distribution licensee, a revenue district, a Municipal Council for a smaller urban area or a Municipal Corporation for a larger urban area as defined in the Article 243(Q) of Constitution of India (74th Amendment) may be considered as the minimum area. The Government of India would notify within three months, the requirements for compliance by applicant for second and subsequent distribution licence as envisaged in Section 14 of the Act. With a view to provide benefits of competition to all section of consumers, the second and subsequent licensee for distribution in the same area shall have obligation to supply to all consumers in accordance with provisions of section 43 of the Electricity Act 2003. The SERCs are required to regulate the tariff including connection charges to be recovered by a distribution licensee under the provisions of the Act. This will ensure that second distribution licensee does not resort to cherry picking by demanding unreasonable connection charges from Page 63
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consumers. The Act mandates supply of electricity through a correct meter within a stipulated period. The Authority should develop regulations as required under Section 55 of the Act within three months. The Act requires all consumers to be metered within two years. The SERCs may obtain from the Distribution Licensees their metering plans, approve these, and monitor the same. The SERCs should encourage use of pre-paid meters. In the first instance, TOD meters for large consumers with a minimum load of one MVA are also to be encouraged. The SERCs should also put in place independent third-party meter testing arrangements. Modern information technology systems may be implemented by the utilities on a priority basis, after considering cost and benefits, to facilitate creation of network information and customer data base which will help in management of load, improvement in quality, detection of theft and tampering, customer information and prompt and correct billing and collection. Special emphasis should be placed on consumer indexing and mapping in a time bound manner. Support is being provided for information technology based systems under the Accelerated Power Development and Reforms Programme (APDRP). High Voltage Distribution System is an effective method for reduction of technical losses, prevention of theft, improved voltage profile and better consumer service. It should be promoted to reduce LT/HT ratio keeping in view the techno economic considerations. SCADA and data management systems are useful for efficient working of Distribution Systems. A time bound programme for implementation of SCADA and data management system should be obtained from Distribution Licensees and approved by the SERCs keeping in view the techno economic considerations. Efforts should be made to install substation automation equipment in a phased manner. The Act has provided for stringent measures against theft of electricity. The States and distribution utilities should ensure effective implementation of these provisions. The State Governments may set up Special Courts as envisaged in Section 153 of the Act.
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6.4.2 Recovery of Cost of Services & Targeted Subsidies There is an urgent need for ensuring recovery of cost of service from consumers to make the power sector sustainable. A minimum level of support may be required to make the electricity affordable for consumers of very poor category. Consumers below poverty line who consume below a specified level, say 30 units per month, may receive special support in terms of tariff which are cross-subsidized. Tariffs for such designated group of consumers will be at least 50 % of the average (overall) cost of supply. This provision will be further re-examined after five years. Over the last few decades cross-subsidies have increased to unsustainable levels. Crosssubsidies hide inefficiencies and losses in operations. There is urgent need to correct this imbalance without giving tariff shock to consumers. The existing cross-subsidies for other categories of consumers would need to be reduced progressively and gradually. The State Governments may give advance subsidy to the extent they consider appropriate in terms of section 65 of the Act in which case necessary budget provision would be required to be made in advance so that the utility does not suffer financial problems that may affect its operations. Efforts would be made to ensure that the subsidies reach the targeted beneficiaries in the most transparent and efficient way. 6.4.3 Competition Aimed At Consumer Benefits The competition for the distribution companies is expected to emanate from the following provisions in EA 2003: (i) Open access to consumers for contracting power from any supplier (generator or other distribution licensee), subject to levy of transmission / wheeling charges, surcharge (on account of cross-subsidy to be reduced over a period of time) and additional surcharge. The competition is further strengthened on account of freedom allowed for captive generation, (ii) Competition in distribution where in multiple licensing can be allowed within the same designated area. As the power markets develop, it would be feasible to finance projects with competitive generation costs outside the long-term power purchase agreement framework. In the coming years, a significant portion of the installed capacity of new generating stations could participate in competitive power markets. This will increase the depth of the power markets and provide alternatives for both generators and licensees/consumers and in long run would lead to reduction in tariff. For achieving this, the policy underscores the following:April 2011 Page 65
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It is the function of the CERC to issue license for inter-state trading which would include authorization for trading throughout the country. The ABT regime introduced by CERC at the national level has had a positive impact. It has also enabled a credible settlement mechanism for intra-day power transfers from licenses with surpluses to licenses experiencing deficits. SERCs are advised to introduce the ABT regime at the State level within one year. Gujarat is one of the state who has implemented intra-state ABT. Captive generating plants should be permitted to sell electricity to licensees and consumers when they are allowed open access by SERCs under section 42 of the Act. Development of power market would need to be undertaken by the Appropriate Commission in consultation with all concerned. The Central Commission and the State Commissions are empowered to make regulations under section 178 and section 181 of the Act respectively. These regulations will ensure implementation of various provisions of the Act regarding encouragement to competition and also consumer protection. The Regulatory Commissions are advised to notify various regulations expeditiously. Enabling regulations for inter and intra State trading and also regulations on power exchange shall be notified by the appropriate Commissions within six months.
6.4.4 Transmission & Distribution Losses It would have to be clearly recognized that Power Sector will remain unviable until T&D losses are brought down significantly and rapidly. A large number of States have been reporting losses of over 40% in the recent years. By any standards, these are unsustainable and imply a steady decline of power sector operations. Continuation of the present level of losses would not only pose a threat to the power sector operations but also jeopardize the growth prospects of the economy as a whole. No reforms can succeed in the midst of such large pilferages on a continuing basis. The State Governments would prepare a Plan to bring down these losses expeditiously. Community participation, effective enforcement, incentives for entities, staff and consumers, and technological upgradation should form part of campaign efforts for reducing these losses. The Central Government will provide incentive based assistance to States that are able to reduce losses as per agreed programmes.
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MGVCL is one of the successful utility to curb losses and has been in the range of around 15% to 18% in last 3 years. This has been result due to the commitment by the employees of MGVCL and effective decision by the top management. 6.4.5 Energy Conservation There is a significant potential of energy savings through energy efficiency and demand side management measures. In order to minimize the overall requirement, energy conservation and demand side management (DSM) is being accorded high priority. The Energy Conservation Act has been enacted and the Bureau of Energy Efficiency has been setup. The potential number of installations where demand side management and energy conservation measures are to be carried out is very large. Bureau of Energy Efficiency (BEE) shall initiate action in this regard. BEE would also make available the estimated conservation and DSM potential, its staged implementation along with cost estimates for consideration in the planning process for National Electricity Plan. Periodic energy audits have been made compulsory for power intensive industries under the Energy Conservation Act. Other industries may also be encouraged to adopt energy audits and energy conservation measures. Energy conservation measures shall be adopted in all Government buildings for which saving potential has been estimated to be about 30% energy. Solar water heating systems and solar passive architecture can contribute significantly to this effort. In the field of energy conservation initial approach would be voluntary and self-regulating with emphasis on labelling of appliances. Gradually as awareness increases, a more regulatory approach of setting standards would be followed. In the agriculture sector, the pump sets and the water delivery system engineered for high efficiency would be promoted. In the industrial sector, energy efficient technologies should be used and energy audits carried out to indicate scope for energy conservation measures. Motors and drive system are the major source of high consumption in Agricultural and Industrial Sector. These need to be addressed. Energy efficient lighting technologies should also be adopted in industries, commercial and domestic establishments. In order to reduce the requirements for capacity additions, the difference between electrical power demand during peak periods and off-peak periods would have to be reduced. Suitable load management techniques should be adopted for this purpose. Differential tariff structure for peak and off peak supply and metering arrangements (Time of Day metering) should be conducive Page 67
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to load management objectives. Regulatory Commissions should ensure adherence to energy efficiency standards by utilities. For effective implementation of energy conservation measures, role of Energy Service Companies would be enlarged. Steps would be taken to encourage and incentivise emergence of such companies. A national campaign for bringing about awareness about energy conservation would be essential to achieve efficient consumption of electricity. A National Action Plan has been developed. Progress on all the proposed measures will be monitored with reference to the specific plans of action.
6.4.6 Training And Human Resource Development In the new reforms framework ushered by Electricity Act 2003, it is particularly important that the electricity industry has access to properly trained human resource. Therefore, concerted action would be taken for augmenting training infrastructure so that adequate well-trained human resource is made available as per the need of the industry. Special attention would need to be paid by the industry for establishing training infrastructure in the field of electricity distribution, regulation, trading and power markets. Efforts should be made so that personnel of electricity supply industry both in the private and public sector become more costconscious and consumer-friendly. 6.4.7 Co-generation and Non-Conventional Energy Sources Non-conventional sources of energy being the most environment friendly there is an urgent need to promote generation of electricity based on such sources of energy. For this purpose, efforts need to be made to reduce the capital cost of projects based on non-conventional and renewable sources of energy. Cost of energy can also be reduced by promoting competition within such projects. At the same time, adequate promotional measures would also have to be taken for development of technologies and a sustained growth of these sources. The Electricity Act 2003 provides that co-generation and generation of electricity from non-conventional sources would be promoted by the SERCs by providing suitable measures for connectivity with grid and sale of electricity to any person and also by specifying, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee. Such percentage for purchase of power from non-conventional sources should be made
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applicable for the tariffs to be determined by the SERCs at the earliest. Progressively the share of electricity from non-conventional sources would need to be increased as prescribed by State Electricity Regulatory Commissions. Such purchase by distribution companies shall be through competitive bidding process. Considering the fact that it will take some time before non-conventional technologies compete, in terms of cost, with conventional sources, the Commission may determine an appropriate differential in prices to promote these technologies. Industries in which both process heat and electricity are needed are well suited for cogeneration of electricity. A significant potential for cogeneration exists in the country, particularly in the sugar industry. SERCs may promote arrangements between the co-generator and the concerned distribution licensee for purchase of surplus power from such plants. Cogeneration system also needs to be encouraged in the overall interest of energy efficiency and also grid stability. 6.4.8 Protection of Consumer Interests And Quality Standards Appropriate Commission should regulate utilities based on pre-determined indices on quality of power supply. Parameters should include, amongst others, frequency and duration of interruption, voltage parameters, harmonics, transformer failure rates, waiting time for restoration of supply, percentage defective meters and waiting list of new connections. The Appropriate Commissions would specify expected standards of performance. Reliability Index (RI) of supply of power to consumers should be indicated by the distribution licensee. A road map for declaration of RI for all cities and towns up to the District Headquarter towns as also for rural areas, should be drawn by up SERCs. The data of RI should be compiled and published by CEA. It is advised that all State Commissions should formulate the guidelines regarding setting up of grievance redressal forum by the licensees as also the regulations regarding the Ombudsman and also appoint/designate the Ombudsman within six months. The Central Government, the State Governments and Electricity Regulatory Commissions should facilitate capacity building of consumer groups and their effective representation before the Regulatory Commissions. This will enhance the efficacy of regulatory process.
6.5
Tariff Policy Page 69
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On January 6, 2006, the Central government notified the National Tariff Policy (NTP) for the power sector in compliance with Section 3 of the Electricity Act and in continuation of the National Electricity Policy passed on February 12, 2005. It basically deals with various parameters with respect to the fixation of tariffs, like providing adequate return on investment to the power generator and supplier and ensuring reasonable user charges for the consumers. It provides uniform guidelines to the state electricity regulatory commissions (SERCs) for the fixation of tariffs for their respective entities (as there are independent SERCs for each state) as well as CERC. It addresses some important issues like method of calculation of cross subsidy under open access and the competitive bidding route for procurement of power. 6.5.1 The objective of this Policy is to: Ensure availability of electricity to consumers at reasonable and competitive rates; Ensure financial viability of the sector and attract investments; Promote transparency, consistency and predictability in regulatory approaches across jurisdictions and minimise perceptions of regulatory risks; Promote competition, efficiency in operations and improvement in quality of supply.
The NTP deals with the general approach to tariffs, wherein it talks about issues such as return on investment and equity norms to be abided by project developers. It discusses various other norms for charging depreciation and cost of debt. It lays down certain operating norms to be followed in order to improve efficiency. Besides, it revisits various parameters like renovation and modernisation costs, and multiyear tariffs (MYT) and talks about promoting captive and renewable energy. The policy states the MYT must be adopted for determination of any tariffs from April 1, 2006. On an overall basis, the policy tries to clarify various issues to improve efficiency and transparency in the power sector. It also emphasises the need for sharing the efficiency gains, as it specifies that a part of the gains should be passed on to the consumer. The policy states that the distribution licensee should, in future, procure power solely through competitive bidding. But this norm does not apply in the case of expansion of existing projects. Further, Central generating units and state controlled/owned units are exempted from competitive bidding. However, the April 2011 Page 70
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expansion of generating capacity by the private developers for this purpose would be restricted to a one-time addition of not more than 50 per cent of the existing capacity. The tariff for all new generating and transmission projects by the public sector would be decided through the competitive bidding route after a period of 5 years or when the regulatory commission thinks the situation is ripe for such competition. The Electricity Act had provided the much-needed impetus to the power sector by opening it up to private investment. 6.6 Tariff Based Competitive Bidding An important policy instrument adopted by the Government was the comprehensive guidelines on competitive bidding for power project development. The Central Government issued detailed guidelines for tariff based bidding process for procurement of electricity by distribution licensees for medium or long-term period vide notification in January, 2005. The main objective of these guidelines was to see that the distribution companies get electricity at best possible price and thereby consumers get electricity at optimal tariff. This also aims at a transparent process of selection of project developer. Similar dispensation in Transmission segment was also extended and comprehensive guidelines were issued in May 2006. It is to be noted that India's power sector regulator has already considered a stand that from January 2011, all thermal power projects and transmission systems will be awarded on competitive tariff bidding. This will be open a market for Generators and Transmission facilities developers to evacuate the power from the generating plan to the State Periphery of the Utilities through the transmission line across India. However it also provides a limitation for distribution utilities whereby they can procure power only through competitive bidding process even from State Generating units with some exception as specified in National Tariff plan. 6.7 Rural Electrification Policy, 2006 The Ministry of Power issued the Rural Electrification Policy in August 2006 with a view of undertaking socio-economic development of the rural areas. The scheme for Rural electricity infrastructure and household electrification include the Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY). Under the scheme, projects could be financed with 90% capital subsidy for provision of Rural Electricity Distribution Backbone (REDB) - Provision of 33/11 KV (or 66/11 KV) sub-stations of adequate capacity and lines in blocks where these do not exist. Page 71
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Creation of Village Electrification Infrastructure (VEI) which includes electrification of un-electrified villages, electrification of un-electrified habitations and Provision of distribution transformers of appropriate capacity in electrified villages / habitation(s). Decentralised Distributed Generation (DDG) and Supply: Decentralised generation cum distribution from conventional sources for villages where grid connectivity is either not feasible or not cost effective provided it is not covered under the programme of Ministry of Non-conventional Energy Sources for providing electricity from non-conventional energy sources under their remote village electrification programme. REDB, VEI and DDG would also cater to the requirement of agriculture and other activities including irrigation pumpsets, Small and medium industries and Khadi and village industries, cold chains, healthcare, education and IT. Rural Household Electrification of Below Poverty Line Households: Electrification of un-electrified Below Poverty Line (BPL) households would be financed with 100% capital subsidy as per norms of Kutir Jyoti Programme in all rural habitations. Households above poverty line would be paying for their connections at prescribed connection charges and no subsidy would be available for this purpose
6.8
R-APDRP (Restructured Accelerated Power Development & Reform Program)
6.8.1 The APDRP was launched in 2001 as an initiative by the Government of India and the States for the strengthening of Transmission and Distribution network and reduction in AT&C losses. APDRP was aimed to renovate and modernize the old sub stations, strengthen the distribution network, undertake energy accounting, reduce technical and commercial losses and improve consumer services. 6.8.2 The restructured APDRP (R-APDRP) was launched by Mop, Gol in July 2008 as a central sector scheme for the Eleventh Plan. The scheme comprises of two parts Part-A & Part-B. 6.8.3 The Part-A of the scheme is being dedicated to establishment of IT enabled system for achieving reliable and verifiable baseline data system. A 100% loan is provided under R-APDRP for Part-A projects & shall be converted to grant on completion and verification of same by Third Party independent evaluating agencies (TPIEA) being appointed by MoP. The Ministry of Power, Government of India has earmarked Rs. 10,000 Crores for R-APDRP under Part-A.
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6.8.4 Part-B of the scheme deals with Transmission & Distribution system strengthening & upgradation projects. The focus for Part-B is on AT&C loss reduction on sustainable basis. 25% loan is provided under Part-B projects and upto 50% of scheme cost is convertible to grant depending on extent of maintaining AT&C loss level at 15% level for five years. The Ministry of Power, Government of India has earmarked sanctioning of schemes upto Rs. 40,000 Crores under R-APDRP Part-B, of which, upto Rs. 20,000 Crores would be converted to grant depending on extent to which utilities reduce AT&C losses in project areas. 6.8.5 The R-APDRP scheme also has a provision for Capacity Building of Utility personnel and development of franchises through Part-C of the scheme. Few pilot projects adopting innovations are also envisaged under Part-C. 6.8.6 Thus, it can be observed that a number of path breaking initiatives have been taken in the recent past in terms of policy pronouncements to revamp the power system. From the distribution perspective, there has been introduction of theft control measures which would enable the utility to reduce losses on account of theft. The recognition of trading as an independent activity will help the utility in the procurement process. The introduction of open access in transmission and phasing of open access in distribution is the right step in providing a competitive environment in the power sector. 6.9 Renewable sources
6.9.1 There are a number of initiatives from the Ministry of New and Renewable Energy (MNRE) for matters relating to renewable energy such as solar, wind, biomass, small hydro, hydrogen, geothermal etc. The endeavor of the Ministry is to promote renewable energy technologies and increase the contribution of renewable energy in the total energy mix in the years to come. 6.9.2 The Ministry has a wide range of programs on research and development, demonstration and promotion of renewable energy for rural, urban, commercial and industrial applications as well as for grid-interactive power generation. A three-fold strategy is being followed: Providing budgetary support for research, development and demonstration of technologies; Facilitating institutional finance through various financial institutions; and Page 73
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Promoting private investment through fiscal incentives, tax holidays, depreciation allowance and remunerative returns for power fed into the grid.
6.9.3 The Government of India has approved of a new policy on the development of Solar energy through the Jawaharlal Nehru National Solar Mission. This will constitute a major contribution by India to the global effort to meet the challenges of climate change. The objectives of the Solar Mission are: To create an enabling policy framework for the deployment of 20,000 MW of solar power by 2022. To ramp up capacity of grid-connected solar power generation to 1000 MW within three years by 2013; an additional 3000 MW by 2017 through the mandatory use of the renewable purchase obligation by utilities backed with a preferential tariff. To create favourable conditions for solar manufacturing capability, particularly solar thermal for indigenous production and market leadership.
6.10
Renewable Energy Certificate Mechanism CERC has issued the Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation Regulations, 2010. Present installed capacity based on renewable is about 15 GW. This requires to be increased to 65 GW in next five years if RPO level is to go up to 10% nationally, as suggested in NAPCC. But a large part of untapped potential is located in the States which have already achieved high levels of RPO. REC mechanism is expected to overcome geographical constraints and provide flexibility to achieve RPO compliance. Some of the Salient Features of REC Mechanism are: o RE generators with capacity untied in PPA will have an option to sell electricity and REC separately; o REC will be issued to RE Generators ; 1 MWh Renewable Energy = 1 REC; o Purchase of REC would be considered as purchase of RE for purpose of RPO compliance; o Grid Connected RE technology approved by MNRE would be eligible for REC mechanism;
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o Separate category of Solar REC o Provision of regulatory charge to enforce compliance of RPO. o RECs are intra-country tradable certificates and are distinct from carbon credits. o It is proposed to make RECs eligible for compliance with energy saving obligations. o Accreditation would be done at State level by State Agency (SA) to be designated by SERC. o o Registration by Central Agency Issuance of REC by Central Agency based on injection certificate.
o REC exchange through power exchanges approved by CERC. o Certificates will be exchanged within floor (minimum) price and forbearance (ceiling) price decided by CERC time to time. o Monitoring Mechanisms: Appointment of Compliance Auditors by CERC for post monitoring of the REC Transactions. 6.11 National Action Plan for Climate Change (NAPCC) The country today is faced with a challenge of sustaining its rapid economic growth while dealing with the growing threat of Climate change. The Government has formulated the National Action Plan on Climate Change (NAPCC) outlining existing and future policies and programs addressing climate mitigation and adaptation. For achieving this, the Plan has identified eight National Missions which represent the long term integrated strategies for combating the climate change issues. Of these the National Mission in relation to energy relate to: 6.11.1 National Solar Mission: The NAPCC aims to promote the development and use of solar energy for power generation and other uses with the ultimate objective of making solar competitive with fossil-based energy options. The mission includes specific goals for increasing use of solar thermal technologies in urban areas, industry, and commercial establishments. Other objectives include the establishment of a solar research centre, increased international collaboration on technology development, strengthening of domestic manufacturing capacity, and increased government funding and international support. 6.11.2 National Mission for Enhanced Energy Efficiency: April 2011 Building on the Energy Page 75
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Conservation Act 2001, the plan recommends: Mandating specific energy consumption decreases in large energy-consuming industries, with a system for companies to trade energy-savings certificates; Energy incentives, including reduced taxes on energy-efficient appliances; and Financing for public-private partnerships to reduce energy consumption through demand-side management programs in the municipal, buildings and agricultural sectors.
6.11.3 Thus, it can be observed that a number of path breaking initiatives have been taken in the recent past in terms of policy pronouncements to revamp the power system. From the generation perspective, the de-licensing of generation would have a significant impact in the market mainly on account of entry of other players in the generation sector, especially IPP/ Merchant as well as Captive Power Producers, thus increasing the competition in the market. The unleashing of the nondiscriminatory open access to the transmission system will have a positive impact on wheeling of power from power surplus states to deficit areas. The generators are in a position to sell their power anywhere in the grid now. On the threat of climate change, there is a need to look at renewable energy as an option for generation on a large scale. Thus the enablers for growth have been put in place to a large extent which will enable growth of the sector in the coming time. 6.12 State Market Regulations The above mentioned developments at the national level were followed up by similar enabling environment at the state level also through intervention by State Regulatory Commissions. Various regulations were enacted by the Regulatory Commissions in compliance with the provisions of the EA 2003 and as guided by the National Tariff Policy and National Electricity Policy. Some of the key regulations which were enacted by the Gujarat Electricity Regulatory Commission as outlined below:
Table 15: Regulations issued by GERC
Sr. No 1. 2. 3.
Name of the Regulations Appointment of consultants Regulations Open Access Regulations Transmission License Regulations
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Sr. No 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. Trading License Regulations Distribution License Regulations SLDC Charges Regulations Fees, Fines & Charges Regulations Power System Management Standards Regulations Standard of Performance of Distribution Licensee Regulations Electricity Supply Code and Related Matters Regulations Terms and Conditions of Tariff Regulations Procedure for filing appeal before the Appellate Authority Regulations Conduct of Business Regulations Establishment of Ombudsman for Redressal of Grievances of Consumers Regulations Establishment of Forum for Redressal of Grievances of Consumers Regulations Grid Code Distribution Code Officers/Staff Service Regulations MYT Regulations Fixing of Trading Margin Regulations Procurement of Energy from Renewable Sources Regulations Designating State Nodal Agency for REC Regulations Name of the Regulations
6.12.1 The power sector in the state has been regulated based on the above outlined regulations and the same has also brought in an element of regulatory certainty to an extent in the way the sector functions. As mentioned previously, the above mentioned enactments have had an impact on the sector at the national as well as the state level. 6.12.2 Based on the Regulations by CERC / SERC, the impacts of the same are envisaged in a point wise manner: April 2011 Page 77
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A. National Level: Under the Act, no license is required for generation and distribution in rural areas as notified by the State Government. This however does not have a major impact as there would not be many big private companies presently interested in these rural areas on account of low demand / revenue in these areas. The provision in the EA 2003 for non-discriminatory open access to the transmission system removes the boundaries for competition. Enhanced role of Trading in the Act further increase the options of consumers to decide source of supply, which in turn makes market more competitive. The CERC has approved the setting up of Power exchanges which are operational in the country. This provides a platform for trading of electricity which can be an alternate source of supply of electricity. Recognizing the urgent need to address the issue of reducing losses and improving the quality of power delivery, the Ministry of Power (MoP) has focused on implementing distribution reforms and has introduced several measures to further the process. The Act recognizes the need for a strategy that distinguishes urban power distribution from rural electricity supply. It also facilitates establishment of participatory models for rural distribution including electric cooperatives, rural gram panchayats (local government), distribution franchisees, etc. The other program focused on implementing distribution is the Accelerated Power Development Reform Program (APDRP) to finance the modernization of sub-transmission & distribution networks including a system of local management and energy accounting through widespread metering in every state utilitys distribution circles. The State owned generation companies are eligible to sell power from new capacity added through MOU route till January 2011 as per the National Tariff Policy. Post January 2011 or such time period as determined by the State Commission, new capacity added shall compulsorily be sold to Distribution Companies through competitive bidding process. MGVCL will also have to go through bidding process to procure power from State Generating Station. B. State Level: C. The Commission in exercise of the powers has notified the GERC (Terms and Conditions of Tariff) Regulations, 2005. The Commission has implemented the Multi-year tariff in Gujarat and benchmark-based performance monitoring has become the practice. D. The GERC has issued the GERC (Standards of Performance of Distribution April 2011 Page 78
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Licensees) Regulations, 2005 which provides the time limits for distribution utilities for carrying out various activities, the quality of supply to be maintained, compensation payable for non-maintenance of standard of performance. E. GERC Issued Licensees Power to Recover Expenditure incurred in providing supply and other Miscellaneous Charges Regulations, 2005. These give the provisions for the duty of the distribution licensee to supply electricity on request and recovery of expenditure for supplying the power. These also give the various charges applicable including registration charges, (non refundable), Reestimate charges, Test Report charges, Testing of Installation Charges Change of name and transfer of Agreement re-connection / Disconnection charges etc. F. The GERC issued the Electricity Supply Code and Related Matters Regulations, 2005 applicable to all Licensees engaged in distribution of electricity and electricity consumers in the State of Gujarat. These provide the system of supply and classification of consumers, procedures for grant of supply, metering and power supply charges (Bills), Restrictions regarding unauthorised use and theft and General Provisions G. The GERC issued (Gujarat Power System Management Standards) 2005 which provide guidelines for the operation and management of power system including power generation, power transmission and power distribution and will be supplemental to Grid Code. H. The GERC issued (Establishment of Forum for Redressal of Grievances of the Consumers) Regulations, 2004.As per these, every Licensee has to establish a Forum in accordance with the Electricity Act, 2003 to ensure prompt redressal of Grievances within the timeframe specified in these Regulations and in accordance with the guidelines laid under these Regulations. I. GERC issued Procurement of Energy from Renewable Sources Regulations, 2010. These provides the minimum purchase obligations to Distribution Licensees as well as Captive and Open Access (s) users/consumers from renewable energy sources 6.12.3 Current GERC Regulations Summary 6.12.3.1 Terms and Conditions of Tariff Regulations, 2005 The Commission has implemented the Multi-year tariff in Gujarat and benchmark-based performance monitoring has become the practice.
6.12.3.2
Standards of Performance of Distribution Licensee Regulations, 2005 Page 79
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The Commission in exercise of the powers has notified the GERC (Terms and Conditions of Tariff) Regulations, 2005. The Commission has implemented the Multi-year tariff in Gujarat and benchmark-based performance monitoring has become the practice. The GERC has issued the GERC (Standards of Performance of Distribution Licensees) Regulations, 2005 which provides the time limits for distribution utilities for carrying out various activities, the quality of supply to be maintained, compensation payable for non-maintenance of standard of performance Supply distribution licensee shall be the sole interface to the consumer and therefore responsible for adherence to SoP relating to the period of giving supply, quality of supply (voltage, harmonics), system of supply, restoration of supply, restoration in burnt meter cases, reconnection on payment of amounts due. In order to provide non-discriminatory access to the wires, the wheeling distribution licensee should not discriminate between changed-over consumers and its own consumers for provision of wheeling services.
6.12.3.3
Procurement of Energy from Renewable sources Regulation The Electricity Act, 2003, mandates the State Electricity Regulatory Commissions to promote cogeneration and generation from renewable energy sources by providing suitable measures for connectivity with the grid, and also to specify for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee. The National Action Plan of Climate Change (NAPCC) has set the target of 5% renewable energy purchase for FY 2009-10 which will increase by 1% for the next 10 years. The NAPCC further recommends strong regulatory measures to fulfil these targets. In this regard, the Gujarat Electricity Regulatory Commission has passed the regulation for promoting the sale of power from renewable energy sources to any person and for procurement of energy from renewable sources by distribution licensee within the State of Gujarat. Further the regulations apply to the following: Distribution licensee Any other person consuming electricity o Generated from conventional Captive Generating Plant having capacity of 5 MW and above for his own use and / or o Procured from conventional generation through open access and
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third-party sale Each distribution licensee shall purchase electricity (in kWh) from renewable energy sources, at a defined minimum percentage of the total consumption of its consumers including T&D losses during a year. Similarly, Captive and Open Access user(s) / consumer(s) shall purchase electricity (in kWh) from renewable energy sources, at a defined minimum percentage of his/her total consumption during a year. The defined minimum percentages by GERC are given below:
Table 16: RPO for Gujarat FY 2010-11 to 2012-13
Renewable Purchase Obligation (RPO) (%) Biomass/ Year Total Wind Solar Bagasse 2010-11 5% 4.50% 0.25% 0.25% 2011-12 6% 5% 0.50% 0.50% 2012-13 7% 5.50% 1% 0.50%
6.12.3.4
Power System Management Standards, 2005 Distribution The Gujarat Power System Management Standards, herein after called Power System Management Standards, provide guidelines for the operation and management of power system including power generation, power transmission and power distribution and will be supplemental to Grid Code. Distribution System Management Standards formulates guidelines for operational criteria covering following aspects: Demand and Supply Scheduling Load Monitoring Load Balancing Voltage Monitoring and Control Data Logging Load Management Communication Safety Co-ordination Maintenance
6.12.3.5
Intra-State ABT implementation In exercise of the powers conferred on it by Section 181 read with Sections Page 81
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39(2)(d), 40(c), 42 (2)(3)(4), 86(1)(c) of the Electricity Act, 2003 (36 of 2003) and Section 20 (3)(b) of the Gujarat Electricity Industry (Reorganisation and Regulation) Act, 2003 (Gujarat Act No. 24 of 2003) and all other powers enabling in this behalf, the Gujarat Electricity Regulatory Commission, made the Gujarat Electricity Regulatory Commission (Open Access in Intra-state Transmission and Distribution) Regulations, 2005[Notification No. 13 of 2005]. The regulation came into force from the date of their publication in the Official Gazette i.e. on 29.09.2005. GERC vide Order dated 11th August, 2006 [Order No. 3 of 2006] in the matter of: Bringing Generating Stations of Gujarat State, Distribution Licensees and other persons under the purview of Intra-State Availability Based Tariff (IntraState ABT), the Commission resolved to implement the scheme of Intra State Availability Based Tariff (Intra-State ABT). The tariff under the ABT regime will have three components namely the capacity charge, the energy charge and the Unscheduled Inter-change charge (UI Charge). Intra-state ABT shall be applicable to the following: o All erstwhile GEB i.e. GSECL owned generating stations; All generating stations owned or otherwise within the general ambit of the State Government by virtue of their being public sector entities or joint sector entities; All other Generators (i.e. IPPs, CPPs etc.) in the Private Sector who have contracted to supply power to Distribution Licensees/GUVNL.; All Distribution Licensees The order paved the way for introduction of Intra-State ABT in the State for the first time. As provided therein, intra-state ABT was to be operated initially on trial run (as a mock exercise) for a period of three months i.e. up to 30thNovember, 2006 and based on the feedback received from the mock exercise, the Commission was to review the provisions of the order. During this period all the Commercial settlement to be based on the existing arrangement. GERC vide Order dated 01.04.2010 [Order No. 3 of 2010] issued Amendment to Order No.3 of 2006 dated 11th August, 2006. This amendment order is to clarify/streamline certain provisions of the earlier order and to decide the date of its actual implementation. The Commission has directed that the Intra-State ABT in the State of Gujarat shall be fully implemented with all its commercial aspects w.e.f. 5th April 2010. The basic UI rate for intra-State entities in Gujarat shall be in line with the Page 82
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CERC notifications on the matter as amended from time to time. INTRA-STATE ABT has been implemented in GUJARAT w.e.f.05.04.2010 as per GERC Order No. 3 of 2010. Various issues have been raised during initial implementation period and majority of them have been resolved. The activities carried out by SLDC for the purpose of implementation of Intra State ABT are briefly as under: Round the clock Scheduling Activities Data base configuration for scheduling and energy accounting Preparation of Trial Accounting Formulation of Energy Accounting Committee Pool Account Settlement System Establishment of Communication Media Submission of Compliance Action Plan for launching Commercial Implementation
6.12.3.6
Provisions of Intra State Open access regulations: These regulations shall apply to open access for use of intra-State transmission system and distribution systems in the State of Gujarat, including when such system is used in conjunction with inter-State transmission system. Subject to the provisions of these regulations, the licensees, generating stations, captive generating plants and consumers shall be eligible for open access to distribution system of a distribution licensee on payment of the wheeling and other charges as may be determined by the Commission in accordance with Chapter 5 of the these regulations. Subject to the provisions of these regulations, open access shall be permissible to the consumers seeking open access for a capacity of 1 MW and above. Provided that when a person, who has established a captive generating plant, opts for open access for carrying the electricity to the destination of his own use, the limitation of 1 MW shall not be applicable. Provided further that duties of the distribution licensee with respect to such open access customers shall be of a common carrier providing nondiscriminatory open access as per section 42(3) of the Act.
6.12.3.7
Licensees Power to Recover Expenditure incurred in providing Supply and other Miscellaneous Charges (First Amendment) Regulations, 2010 Page 83
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For extending supply to the applicants for Low Tension connection, the licensee shall estimate the cost of electrical plant such as distribution transformer (DTR) along with switch gear etc, as follows: Cost of the works of erection of DTR including switchgear (in Rupees) = P Rated capacity of DTR in KVA = Q Cost per KVA (in Rupees) = P/Q Contracted load in KVA of the applicant = K Amount payable by applicant towards electrical plant (in Rupees)= K (P/Q) On requirement of the augmentation of the capacity of an existing electrical plant (such as DTR and switchgear etc.), the differential cost of existing and new electrical plant will form the basis of calculation of pro-rata charges. Distribution licensee shall continue to estimate the amounts payable by subsequent applicants as above till the full cost of transformer is recovered.
6.12.3.8
Different Orders on determination of tariff for renewable sources of energy Wind Power Gujarat Electricity Regulatory Commission (the Commission) has determined the price for procurement of power by Distribution Licensees in Gujarat from wind energy projects. The Commission has determined the tariff for generation from new wind energy project at Rs.3.37 (constant) for its entire project life of 20 years i.e. from the first year to the twentieth year. This tariff rate shall be applicable for purchase of wind energy by GUVNL/Distribution Licensees for complying with the purchase obligation that may be specified by the Commission from time to time. This tariff will be applicable to wind energy generators who commission brand new wind energy plants and equipments after the date of this order. Old/second hand equipment will not be accepted. Those WEGs being set up exclusively for sale to distribution licensee will be eligible for the tariff framed by this order from the date of this order and in accordance with the Regulations. However, the Commission will consider the question of enhancing the percentage obligation from time to time. Those WEGs being set up for self use and which have not opted for the benefits under the Wind Power Generation Policy2002 will be covered by the provisions of this order Page 84
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after 20th June 2007. Baggasse Based Co-generation The Gujarat Electricity Regulatory Commission (the Commission) has determined the price for procurement of power by Distribution Licensees in Gujarat from bagasse based cogeneration projects. The Commission has determined the tariff for generation from bagasse based cogeneration project at Rs. 3.00 (constant) for its entire project life of 20 years i.e. from the first year to the twentieth year. This tariff rate shall be applicable for purchase of such energy by GUVNL/Distribution Licensees for complying with the purchase obligation that may be specified by the Commission from time to time. Biomass Gasification The Gujarat Electricity Regulatory Commission (the Commission) has determined the price for procurement of power by distribution licensees in Gujarat from biomass gasification based generation projects. The Commission has determined the tariff for procurement of power from biomass gasification based generation project at Rs. 3.08 (constant) for its entire project life of 20 years i.e. from the first year to the twentieth year. This tariff rate shall be applicable for purchase of such energy by GUVNL/Distribution Licensees for complying with the purchase obligation that may be specified by the Commission from time to time. Solar Energy The Gujarat Electricity Regulatory Commission (hereinafter referred to as the Commission) determines the tariff for procurement of power by Distribution Licensees in Gujarat from Solar energy projects. The levelised tariff including RoE of Solar PV power generation, using a discounting rate of 10.19% works out to Rs. 12.54 per kWh and levelised tariff using the same discounting factor for Solar Thermal Power generation works out to Rs.9.29 per kWh. However, the Commission felt that it would be appropriate to determine tariff for two sub-periods: 12 years and 13 years instead of the same tariff for 25 years. Hence, the Commission determined the tariff for generation of electricity from Solar PV Power project at Rs.15 per kWh for the initial 12 (twelve) Page 85
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years starting from the date of Commercial operation of the project and Rs.5 per kWh from the 13th (Thirteenth) year to 25th (twenty fifth) year. The Commission also determined the tariff for generation of electricity from Solar Thermal Power project at Rs.11 per kWh for the initial 12 (twelve) years starting from the date of Commercial operation of the project and Rs.4.00 per kWh from the 13th (Thirteenth) year to 25th (twenty fifth) year. The above tariffs take into account the benefit of accelerated depreciation under the Income Tax Act and Rules. For a project that does not get such benefit, the Commission would, on a petition in that respect, determine a separate tariff taking into account all the relevant facts. This tariff rate shall be applicable for purchase of solar power generation by Distribution Licensees and other entities for complying with the renewable power purchase obligation specified in the relevant Regulations of the Commission from time to time. This tariff will be applicable to solar power generators, who will commission brand new solar energy plants and equipments during the control period applicable for this order.
6.12.3.9
Designating State Nodal Agency for REC Regulations In exercise of the powers conferred under Regulation 6 (a) of the Gujarat Electricity Regulatory Commission (Procurement of Energy From Renewable Source) Regulations (Notification No 3 of 2010) the Gujarat Electricity Regulatory Commission designated the Gujarat Energy Development Agency (GEDA) as the State Agency for the purposes of the Procurement of Energy From Renewable Sources Regulations (Notification No 3 of 2010). State Nodal Agency will act as the agency for accreditation and recommending the renewable energy projects for registration and to undertake such functions as may be specified under the Electricity Act 2003. State Nodal Agency shall be responsible for accreditation of RE generators, certification of RE in consultation with SLDC for the purpose of issue of REC.
6.13
Key Provisions The key provisions of the EA 2003 and other policy enablers which have thrown up opportunities as well as challenges to MGVCL are: Parallel License Introduction of Open Access Page 86
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Renewable Purchase Obligation Multi-year Tariff Regime
While there a number of enablers in the environment for growth opportunities, there are also challenges that would need to be analysed, along with the inherent strengths and weakness of MGVCL to consider the future outlook of the Company.
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7. Market Issues and Challenges A number of market related issues and challenges are expected to create uncertainty in the power distribution business environment and therefore require the appropriate reactive measures. These issues and challenges are as follows: 7.1 Open Access Regulation Allowing open-access in the distribution segment and ensuring options for the end users are key strategies to develop a competitive power market in India. As per Electricity Act 2003 and GERC Regulations, it has mandated to distribution licensee to implement non-discriminatory Open Access resulting in loss of subsidising category of consumers. The current class of HT consumers who intend to source electricity under the Open Access route are the subsidizing consumers for the licensee, as and when such consumer avails Open Access, the Distribution licensee encounters an instantaneous revenue shortfall. However, by identifying cross subsidy surcharge and additional surcharge, on account of laying a wire network and related infrastructure to supply electricity to the consumer, the prospective OA applicant would share the burden of cross subsidy that is built in his tariff. In light of the EA 2003 provisions regarding non-discriminatory open access following challenges will rise in front of a distribution licensee: 7.1.1 Generators and power traders who will try to win away HT and large consumers and try to negotiate bilateral power supply or purchase contracts with them. These generators could include GSECL, CGS, IPPs, Captive Generators and new entrants in generation (merchant plants). 7.1.2 GUVNL on behalf of Distribution Companies in Gujarat have tied-up its future requirement of power by entering into long term contracts with GSECL, CGS and under the UMPP/Case-1 route. By tying-up long term PPAs, the Discoms are obliged to pay the capacity charges for all such power and in case of shifting of any big HT consumers through open access will result in fall in demand and have impact on financial whereby DISCOM will have to pay for capacity charges without consuming power. 7.1.3 The Discoms have heavy responsibility to meet the needs of agricultural consumers and small domestic consumers at a lower rate than the average cost. Consumers who are currently the HT consumers and commercial consumers paying a higher
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tariff are providing the means to do this. If such consumers walk away from Grid supply, subsidy from Government will have to increase. The correct position would depend on the situation regarding relative tariff of the different consumers, the possible rates of growth of category wise consumption and the potential for purchasing additional power at low rates in the future. 7.2 ABT implementation With ABT implementation a three part tariff structure would be in place, consisting of demand charges, energy charges and UI (Unscheduled Interchange) charges. Following would be the benefits to a Discom with intra state ABT implementation: Effective Power purchase cost may reduce by cheaper power purchase and encouraging consumers to use power during off-peak/ night hours. Demand Supply gap may reduce to some extent. Trading of power becomes more practicable. Optimum utilization of Power Stations. Accounting of Non-conventional Energy becomes transparent. Proper Energy Accounting is possible. Grid Discipline will improve thereby reducing chances of system collapse. Following are the issues faced by Discom with ABT Implementation Lack of trained & sufficient staff in Load Dispatch Centers after quantum of activities increased after implementation of ABT. Proper SCADA System should be in place. 7.3 UI implication in implementation of Intra-State ABT
7.3.1 GUVNL submitted a petition to GERC the combined power system operations of four subsidiary distribution licensees of GUVNL for the purpose of operational efficiency, load management and applicability of UI charges. This will enable distribution licensees to maintain uniformity in supply of power across the state, to ensure off take of power at economical rates, following state level merit order discipline, to reduce the UI implication on account of differential rates of UI on under drawl and over drawl of power, to maintain uniform retail tariffs in the State and for better compliance of ABT Orders and Regulations. 7.3.2 It was specified that the total capacity tied up by GUVNL for four distribution licensees and allocation made by GUVNL to them are normally sufficient to meet their combined power requirements. However, on account of variation in their
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individual / respective demand during the day period and changes in consumer mix, load requirement, geographical condition etc., distribution licensees are facing operational difficulties, whereby some distribution licensees are having surplus power and others are facing shortage of power, although the total demand of four distribution licensees may be less than or equal to the available generation at that point of time. 7.3.3 In such situation some distribution licensees are required to pay higher UI charges for over drawl, leading to uneconomical operation and procurement of electricity at a higher rate. Some of the generating stations are required to back down their operation of existing cheaper generation due to low demand of distribution licensees who are purchasing electricity from such generating stations. 7.3.4 Due to steps undertaken by SLDC sometimes to back down generation plant, this results in un-equal power supply amongst the four subsidiary distribution licensees, which creates anomaly. 7.3.5 Therefore, a request was made to consider uniform entities for consideration of load forecasting, scheduling and drawl of energy of distribution licensee of erstwhile GEB for operational efficiency. The same was not maintainable by GERC and therefore, distribution licensee will be considered as a separate independent legal entity for ABT implementation. 7.3.6 Therefore, a proper planning and scheduling of power needs to be undertaken by GUVNL / DISCOM to avoid any penalty under intra-state UI. 7.4 Parallel License
7.4.1 As per the Electricity Act 2003, a parallel licensee is possible to be operated whereby two licensees are supplying power in the same specified area. In the case of MGVCL, due to amendment in the Electricity Act 2003, SEZ became the Distribution Licensee for the SEZ area whereby MGVCL is supplying power. It might also be possible that in future, other distribution licensee may get an approval to supply power in MGVCL area. In that case, there is a likelihood that the urban areas may witness competition due to parallel distribution licensees as these areas witness relatively less distribution losses and are marked by the non-existence of agriculture consumers and a willingness to pay on the part of their regular consumers resulting in cherry picking of area by such parallel licensee. The major issue is that the existing licensees are already locked in long term power purchase contracts with fixed costs to be paid April 2011 Page 90
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irrespective of off-take by these licensees. In view of this, the migration may lead to a situation where in the average power purchase cost is pushed upward by the fixed costs flowing from the PPAs and thereby further aggravating the situation with respect to the consumer level tariffs of the existing licensees, leading to further migration. 7.4.2 Already, Torrent and Kandla has a distribution license within the State. There is a risk of them entering the MGVCL Distribution license area and apply for parallel license. The existing case of parallel license is already there in Mumbai and Jamshedpur. 7.5 Regulatory Provisions Risk Analysis of power distribution assets on behalf of a large power generation company, including analysis of regulatory framework and regulatory risks, performance benchmarks/ alternative performance based regulation, contractual risk with respect to shareholders agreement, acquisition and the loan agreement are part of statutory and regulatory risk. Also, Pricing of Open Access Surcharge, wheeling charges and methodology for tariff determination, all of which will determine the total cost of served power is also one of the Regulaotry risk for distirbution utility. 7.6 Industry Risk and Competition
7.6.1 The industry risk assessment is driven by appreciation of the overall demand-supply scenario of power and of the overall policy environment within which entities operate. Weaker generation or transmission entities, may hinder smooth funcitoning of the downstream license in a conventioal set-up. 7.6.2 The new Electricity Act has provided various opportunities and challenges to power sector players to bring in greater competition. Distribution business is subject to maximum competition in the short to medium term mainly for the bulk and HT Customers. 7.6.3 In the future, new distribution licensees and retailers are likely to emerge, based on overall competitive pricing and therefore, MGVCL would have to compete in the market place. 7.6.4 The opening of sector reform and electricity markets has already lead to open access where MGVCL could procure cheapest power if available as well as consumers can April 2011 Page 91
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also avail the cheapest power from any other alternate sources. This will shift the balance of power towards better performing distribution licensees, who generate a higher quantum of cash from operations and are in a better position to service their obligaitons towards the generation and transmission licensees. 7.6.5 MGVCL will face the challenge to retain its market share in the face of competition. The flight of HT Consumers of MGVCL to Traders and other generators through open access or parallel licensing could lead to reduced load of subsidizing consumers, impacting the sector cash flows. 7.7 Renewable Purchase Obligation (RPO)
7.7.1 The Electricity Act, 2003, mandates the State Electricity Regulatory Commissions to promote cogeneration and generation from renewable energy sources by providing suitable measures for connectivity with the grid, and also to specify for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee. 7.7.2 The National Action Plan of Climate Change (NAPCC) has set the target of 5% renewable energy purchase for FY 2009-10 which will increase by 1% for the next 10 years. The NAPCC further recommends strong regulatory measures to fulfil these targets. 7.7.3 GERC has already passed the regulation for promoting the sale of power from renewable energy sources to any person and for procurement of energy from renewable sources by distribution licensee within the State of Gujarat. This kind of policy enforcement and regulation with penalty clauses as intended by GERC will provide the much-needed impetus for the RPO market to flourish in India and provide an incentive for RE power producers. 7.7.4 The states having high or moderate RE potential would drive the development of RE power in coming years. However, considering Gujarat and its huge potential and upcoming plans for wind and solar energy generation, there would be enough installed capacity to meet the RPO norm mandated by the Honble Commission. 7.7.5 Renewable Energy Certificate (REC) mechanism which could go a long way in enabling states deficit in renewable potential to meet their obligations while encouraging developers to set up generation facilities based on renewable sources in most optimal locations. April 2011 Page 92
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7.7.6 REC mechanism provides an excellent tool to ensure that all states contribute in the development of RE based power & hence fulfil their RPO. 7.7.7 With the REC mechanism in place, a regional level forecasting of RE sources and targets/transfer of RE power could be considered. 7.7.8 Other form of RE technologies like biomass based stations could provide stability and increase the overall Capacity Utilization Factor (CUF) of RE technologies. 7.7.9 REC mechanism offers the potential to expand the market for renewable by broadening the availability and scope of power products which are available to customers. 7.7.10 If the Obligated Entity fails to comply with the RPO target as provided, it has to pay RPO regulatory charges which are equivalent to the highest applicable preferential tariff during the year. 7.7.11 Given that the RPO for 2012-13 will continue after that until the regulation is modified, Torrent Power India has become the first power generator to invite Expression of Interest to supply Renewable Energy. 7.8 Impact of DSM Measures
7.8.1 Every Distribution Licensee shall make DSM an integral part of their day-to-day operations, and undertake planning, designing and implementation of appropriate DSM programs on a sustained basis. Distribution Licensees may recover all justifiable costs incurred by them in any DSM related activity, including planning, designing, implementing, monitoring and evaluating DSM programs, by adding these costs to their Annual Revenue Requirement to enable their funding through tariff or by implementing programs at the Consumers premises that would attract appropriate Return on Investment. 7.8.2 All such DSM related activity/ programs undertaken by the Distribution Licensees needs to be Will need to be cost effective for the consumers of the Distribution Licensees as well as to the Distribution Licensees themselves; Shall protect the interest of consumers and be implemented in an equitable manner; Result in overall tariff reductions for all the consumers of the licensees; April 2011 Page 93
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The benefits which an utility will get are: Avoided power purchase cost; Sale of saved energy to industrial consumers;
7.8.3 There are 3 main categories of utility DSM programs vizEnergy Conservation Program: This is intended to be achieved by using equipment with improved efficiency, building and industrial processes. Load management Programs: This is achieved by redistributing energy demand to spread it more evenly i.e. load shifting program offering time of use tariff and interruptible power tariff rates etc. Strategic Load growth program: Programs that uncover cost effective electrical technologies that operate primarily during periods of low electricity demand. o In terms of saving of Million Units (MUs), the agricultural pump sets have the highest potential o Maximum leverage is possible in the Domestic sector i.e. by investment of lowest capital as the maximum savings are possible in domestic lighting; o Savings in domestic and agricultural sector shall not only avoid power purchase cost but shall also reduce subsidy burden on state Government; o Promotion of incentive schemes for agriculture consumers for implementing energy efficiency/DSM through Kisan Melas & road shows; o Develop proposals for sale of energy efficient pump sets & accessories at discounted rates; o Rebate in energy charges for agricultural consumers on installation of energy saving devices including start labelled pumps; 7.8.4 Implementing Time of Day (TOD) Tariffs: All utilities should introduce TOD tariffs for large industrial and commercial consumers to flatten the load curve. 7.8.5 Improving efficiency of Municipal Water pumping: Institute measures that encourage adoption of efficient pumping systems and shifting of pumping load to off-peak hours. 7.8.6 Activities to be carried out by the Distribution Licensees: Load research & consumer survey; Load forecasting at aggregate system level, segment level and end-use level; Conduct of DSM and Demand Response Potential Studies, also including relationship with Integrated resource planning (IRP) exercises; Setting short- and long-term DSM targets (e.g., kWh, MW); April 2011 Page 94
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DSM Programmes, Portfolio and Plans preparation, documentation, routine monitoring and Regulatory reporting; Preparation of Annual work-plan for DSM Programmes, Portfolio and Plans; Preparation of annual DSM Budgets; DSM programme level dispute resolution; Development of DSM related centralised information system and database to aid DSM planning, programme design and cost assumptions; Inventory of DSM programmes, costs and achievements; DSM measure wise estimation of deemed savings, costs and timing; Avoided costs generation, transmission and distribution; Research and analysis in support of DSM plans; Any other items that may be deemed important by the Commission to support DSM activities in the State; 7.9 Universal Service Obligation The Company is obliged to supply power to all. Gujarat Discoms have very large distribution networks and cover large geographic areas. New connections to remote areas are expensive and maintaining reliable supply levels are difficult. These features tend to increase technical losses and the costs of operation and maintenance. Government of India should extend Universal Service Obligations criteria to the new market entrants to prevent cherry picking of subsidizing customers. 7.10 Power Purchase Responsibility The Company may require contracting power directly from generators to have direct control over its cost of power purchase and to seek out low-cost power source as well as to meet the RPO as specified by GERC. 7.11 Market Penetration and service area The widespread distribution network of MGVCL and the retail reach of such infrastructure would be key discriminators of a licensees market position. Usually a distribution licensee used to operate in exclusive zones which however are now allowed by any other distribution licensee or a franchisee. Although the mix of customers within a service area and their purchasing power are important considerations, the service quality and reliability offered by a distribution licensee are important determinants of the sustainability of such a relationship. While the market may be ready to offer a price premium for a more responsive and reliable April 2011 Page 95
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licensee, the latter has to maintain this value proposition for the premium to be sustainable. The growth of a lower paying customer segment and shifts in better paying customer segments are the trends that needs to be factored while undertaking the market assessment. 7.12 Cost to serve against average Realization With the advent of the Electricity Act 2003 and various policy initiatives thereof, it has now become mandatory for the Electrical utilities to gradually reduce the cross subsidy and move the tariffs in the State towards the Cost of Supply. Traditionally, in the Indian context, tariffs for domestic and agricultural consumers have been heavily subsidised either by the state through subsidies and subventions or through cross subsidisation by other consumer categories, primarily the consumers using electricity at high voltages. As per Section 61 (g) of Electricity Act, 2003, the tariff progressively reflects the cost of supply of electricity and also, reduces and eliminates cross-subsidies within the period to be specified by the Appropriate Commission; 7.12.1 Given below is a comparison of Gujarat Discoms with two other states with respect to their Average Cost of Supply Vs Average realization per unit power sold. The other two states are Andhra Pradesh and Delhi. Delhi has private players into distribution viz. NDPL, BRPL, BYPL and it is analysed that Andhra Pradesh has state owned distribution licensee in place & here the gap between the cost of supply and realization is comparable with that of Gujarat discoms.
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Figure 21: State wise Average Cost of Supply Vs Realization
6 Average CoS 5 4.05 4.72 Rs/Unit 4.35 3.75 4 3.19 2.80 3.47 2.84 3.34 2.88 3.40 3 2 1 0
APCPDCL APEPDCL APNPDCL APSPDCL BRPL BYPL NDPL UGVCL PGVCL MGVCL DGVCL
Average Realization (excluding subsidy) 4.26 4.62 4.28 4.75 4.88 4.51 5.08 4.82
7.12.2 Above graph depicts the average cost of supply of several state owned utilities. The cost to serve the agricultural comnsumers is the highest but in Gujarat UGVCLs cost of supply is lowest because of the allocation of lower cost power by GUVNL to maintain the price parity. 7.13 Rationalization of tariffs to retain HT & large Consumers
7.13.1 It has been widely recognised that rational and economic pricing of electricity can be one of the major tools for energy conservation and sustainable use of ground water resources. In terms of the Section 61 (g) of the Act, the Appropriate Commission shall be guided by the objective that the tariff progressively reflects the efficient and prudent cost of supply of electricity. 7.13.2 So far the practice being followed in fixing the tariff rates for various categories of consumers is based on cost of the supply at consumer end, the capacity of the consumer to pay and the socio economic policy of the government. Hence the slab rates are so designed that the affluent customers are paying more and economically weaker consumers paying less for their consumption. Thus there is cross subsidisation between various categories of consumers and within a particular category of consumers itself. 7.13.3 Currently, a highly complex tariff structure is in operation and an imbalanced pricing leading to cross subsidisation is in force. The rationalization of tariffs is required simplify the structure and introducing cost reflective tariff by way of retaining the high end customers. MGVCL has to move to a direction to align tariff to cost and moving towards the reducing of cross subsidy prevailing in the system. April 2011 Page 97
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Table 17: MGVCL's Realization as a % of CoS
Cost to Serve (Rs/Kwh) 5.37 4.78 5.32 4.95 5.42 4.02 Average Realisation (Rs/Kwh) 3.80 5.63 5.47 4.09 2.45 3.44 4.45 3.76 4.88 5.46 5.77 4.51 Av Realzn as % of COS 71% 118% 103% 83% 45% 86% 123% 153% 92%
Particulars Low Tension Domestic Commercial Industrial Low & Medium Voltage (Ind. LT) Street Light (Public Lighting) Irrigation Agricultural Public Water Works & Sewerage Pumps (PWW) High Tension Industrial High Voltage (Ind. HT) Railway Traction TOTAL
7.13.4 Domestic and agricultural consumers typically require the highest per-unit cost of service due to low load and remoteness, while HT and large consumers require least cost per unit to serve. Furthermore, agricultural consumers, who have a low load factor, tend to require higher peak capacity while total energy consumption remains low. 7.14 Standards of Performance (SOPs) Supply distribution licensee shall be the sole interface to the consumer and therefore responsible for adherence to SoP relating to the period of giving supply, quality of supply (voltage, harmonics), system of supply, restoration of supply, restoration in burnt meter cases, reconnection on payment of amounts due. In order to provide non-discriminatory access to the wires, the wheeling distribution licensee should not discriminate between changed-over consumers and its own consumers for provision of wheeling services. 7.15 Operating norms Regulated by SERC Distribution Licensee have a direct interface with the customers and hence have to develop necessary process, credit guidelines, billing systems and collection mechanisms to ensure that the business is run efficiently. Operating efficiency will impact the MBC cycle which would affect cash flows. Also the actual cost of power (Procured through internal or external sources), within approved tariff structure and allowed T&D Losses. Efforts are constantly required to track energy flows in the system to ensure that all the energy being input in the T&D April 2011 Page 98
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system is also billed after accounting for technical losses. Man-power productivity parameters and other administrative expenses will also need to be closely tracked and assessed in relation to regulatory forbearance. 7.16 Future Market Operations and financial positions The future assessment is based on the aspects in the business environment including the regulatory stance, changing market conditions, differential growth rates of various consumers, tariff levels and growth orientation, all of which would translate into the financial projections and performance.
While there a number of enablers in the environment for growth opportunities, there are also challenges that would need to be analysed, along with the inherent strengths and weakness of MGVCL to consider the future outlook of the Company.
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8. SWOT Analysis The strength and weakness of MGVCL aims at assessing the companys performance in vital areas such as Human resource management, operation efficiency, financial management, MIS and IT. The opportunities and threats have been identified after analyzing the business environment, potential competition and the issues and challenges that face the company in a dynamic environment that is evolving rapidly and will continue to do the same in the foreseeable future. The companys business environment has been analysed in terms of sector reform and regulations under EA 2003 and GERC regulations. 8.1 Background
8.1.1 As a part of the development of strategic plan for the business, its necessary to understand the inherent competitive advantage of the company as well as the risk surrounding the business environment. Like any other business, it is very important for MGVCL to evaluate the environment both internal and external while charting out its growth path. The aim of any SWOT analysis would be to identify the key internal and external factors that are important to achieving the objective of the company. The SWOT analysis is a strategic planning technique used to assess the internal and external environment in which the company operates and competes. These come from within the company's unique value chain. The information being used for the SWOT analysis is grouped into two main categories: Internal factors The strengths and weaknesses internal to the organization; External factors The opportunities and threats presented by the external environment to the organization; Strengths
8.2
8.2.1 Experienced Manpower The manpower of MGVCL is quite experienced and has about 3605 number of technical workforce out of a total of 6208 which gives it an edge over the other utilities around the nation. The workforce comprises of both the technical as well as non-technical people. The workforce is quite efficient, senior management is quite efficient & has paved the way in making MGVCL one of the best performing utilities in India. 8.2.2 Wide spread network April 2011 Page 100
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MGVCL has a wide spread network covering central region and connecting rural & urban consumers. These wide spread networks are MGVCLs one of the biggest strengths, providing it a lot of leverage. 8.2.3 Operation efficiency MGVCL is quiet efficient in maintaining and operating its network which is evident from its low distribution loss level & high system reliability and availability. Company has incurred Rs 44 Crores during the year for R&D under review for system improvement, HVDS, ABC, Underground Cables. Conductor renovation of 1283 KM is carried out under system improvement. Detailed analysis and in depth study is carried out for feeders having high ampere loading & low tail end voltages and accordingly such feeders are bifurcated as per system improvement (SI) norms. Total such 45 feeders are bifurcated under System improvement. 8.2.4 Demand side management (DSM) measures MGVCL has taken several energy efficiency measures in order to conserve energy, they as follows: High-loss feeders have been identified, close monitoring is being done up to the Sub-division level to reduce the technical losses and meters are provided on TCs for better control on systems to identify the weak pockets with high losses. Regular and periodical maintenance of line and equipments. Pamphlets explaining energy saving measures and its efficient use along with energy bills are circulated for public awareness. The seminar on energy conservation was also arranged during the year with participation of all categories of consumers. Mass awareness amongst consumers for energy conservation. Under the publicity campaign, printing of pamphlets, posters, banners, telecasting of short films on TV, cable network and on radio, advertisement in print media, depicting hoardings containing Energy saving messages/ slogans etc. have also been carried out during the celebration of Energy Conservation Week. Under the Swarnim Gujarat Mahotsav, the month of August-2010 was celebrated as Urja Shakti Month Aug-2010, under which various programs were organized by the Company for creating awareness of energy conservation with active involvement of the employees and public at large. Specific areas in which R&D carried out by the Company: April 2011 Page 101
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Cable and Conductor measuring instruments are proposed for all four Circles of the Company. Installation at Narol RSO under Sabarmati Circle is completed. Concept of single phase transformer of 5 KVA introduced for reduction of technical and commercial losses. Advantages of the above measures: Reduction of line losses at optimum capital investment Reduction in voltage drop. Reduction in failure of DTC. Prevention of Theft of energy. Improvement in Reliability of supply 8.2.5 Novel Initiatives for performance improvement MGVCL has tried to provide satisfactory services to such a large consumer base and have initiated novel approaches which are highlighted as below: MGVCL got the patent for improved single phase power system popularly known as Specially Designed Transformer (SDT). It is for the first time in history that such a revolutionary technology breakthrough invented by a DISCOM has received a patent for such invention. SDT introduced for load shedding activity on Agriculture dominant feeders. DRUM program implemented by MGVCL to create a centre of excellence. DRUM consists of technical assistance (TA), training needs assessment (TNA), and funding. Pilot project is initiated for installing roof type solar power system in 5 subdivision offices of the company. To offer best services to valuable customers, MGVCL are providing 24*7 hour customer care centre working for 365 days. Concept of Ring Distribution has been implemented to get the uninterrupted power supply even in the event of faults in the Ring feeders. MGVCL has taken these steps of modernization in the direction towards customer satisfaction and excellence. The thinking process and work is being extended further to look into the possibilities of underground network across the city with usage of Ring main technology. The Cable fault locating system has been implemented which focuses on localization & pinpointing of cable faults with the required accuracy and within economically justifiable time duration. Page 102
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GIS has been implemented by MGVCL for identification of all customers on the network as well as to rectify any error or fault within the system in less time. The Hi Tech Laboratory for testing of high quality meters with accuracy confirming to Indian Standards is set-up at Baroda.
8.2.6 Uninterrupted Quality Power Supply Power Availability for FY 2009-10 improved to 99.49% (without load shedding). Transformer failure rate is also quite low: 5.06 %. For strengthening of distribution network and to improve system operations several initiatives are taken during the year and has lead to uninterrupted quality power supply. 8.2.7 Branding by rewards from MoP In past five years, MGVCL has achieved many milestones and has been recognised all over India as one of the efficient distribution company. Major Achievement of MGVCL is to get award & recognition at national level for excellence in operations, execution of projects, and innovation in designs & distribution in urban & rural areas. 8.3 Weaknesses The distribution network of MGVCL is quite old and there has not been regular repairs and maintenance in the past due to paucity of funds. Most of the network in the urban areas is overhead network which is susceptible to the onslaught of environment. In the coastal areas and hilly areas the corrosion effect is very prominent. Thus, an ageing infrastructure leads to issues increased breakdown, frequent maintenance and increased expenses for repairs and maintenance. 8.3.2 Commercial arrangement In the existing scenario, GUVNL allocates power & the power purchase cost among the four Discoms based on the consumer mix of each utility. Also the tariffs for the consumer categories across all the four Discoms are similar. The Discoms should be given authority of purchasing power from outside in order to lower their respective power purchase cost. In case the Discoms independently procure power from generating stations, they would require flexibility to charge tariffs from consumers that reflect the power purchase cost of individual Discoms in order to maintain their profitability in the business. 8.3.3 Treatment of Agricultural subsidy April 2011 Page 103
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In the state of Gujarat, agriculture is highly subsidized category. To compensate for the loss incurred by the utility, government of Gujarat releases agriculture subsidy. Total subsidy is to be distributed among the four Discoms based on their share in overall agriculture consumption. The subsidy paid by government has been capped at Rs 1100 Crores since the year 2002. Agriculture forms a reasonable 16% of energy sales in MGVCLs area of operation. With the increasing number of consumers in this category & low realization, the subsidy requirement will further increase. Since the subsidy has been capped, MGVCL will have to look forward to other categories to cross subsidize agriculture category. But as already discussed, the tariff of HT & LT industries is already higher, hence tariff rationalization has to be institutionalized very soon 8.3.4 Tariff Structure in line with Cost of Supply In a competitive market scenario, the ability of a state to attract industries would depend on its competitiveness in cost of power. Hence to rationalize the tariff, the tariff of each category of consumer has to be brought closer to its cost of supply.
Figure 22: Sales breakup FY 2009-10
Residential 6% 33% 9% 8% 16% 1% 25% Commercial Industrial LT Public Water Works Agriculture Street Light Industrial HT 2% Railway Traction
8.3.5 Ageing employees MGVCL has an ageing employee profile with the average age of employees being around 44.94 years, and 2153 employees i.e. around 34% of the total employees being above 50 years of age. This is a worrisome factor with MGVCL looking for major capital expenditure of its network and could lead to operational issues in the April 2011 Page 104
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near future. 8.4 Opportunities In light of the initiatives taken up by the government of Gujarat and various upcoming and existing regulations at state as well as central level, the company faces several business opportunities. The business opportunities that could be open up to MGVCL are as follows: 8.4.1 Contracting Power Supply The open access to transmission and competitive bidding implemented form January 2011, envisaged upon enactment of EA 2003, would enable the Company/ GUVNL to negotiate power purchase contracts with suppliers who offer the best contractual terms. The Company could purchase power from captive generators, central generating stations, State Generating Station, IPPs and new generators. This aspect is important, as the Company would have direct control over power purchase costs and the possibility of meeting the demand that is not satisfied in its territory 8.4.2 Eliminating Peak deficit The competition provisions for power generation and open access to transmission under EA 2003 should encourage more power generation in order to meet any peak deficit. This in turn should translate into extra revenues to the Company if it could be competitive enough to satisfy power shortage in its territory through power purchases. 8.4.3 New Business Opportunities The Company could rent its network to other businesses, such as fibre optic and communication providers, to have access to a large pool of customers present in a large geographical area. Furthermore, commercial entities could take advantage of the Company access to a large number of customers to develop new businesses or improve existing operations such as sales of products and services. For instance, the Companys bills could be used for publicity purposes. 8.4.4 Ancillary Services MGVCL has lot of in-house capacity available which can be utilised for providing ancillary services to other power sector players. These services can be in the field of providing meter testing facilities, technical consultancy, training, etc. For this purpose, the laboratories and training centres already exist which would be utilised April 2011 Page 105
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for this purpose. A separate wing may be needed to be created with dedicated manpower and with a focused business development team. The business development team would be responsible for keeping a track of the market as well as identifying new players who might need such services. 8.4.5 CDM benefits The Clean Development Mechanism (CDM), defined in Article 12 of the Protocol, allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol to implement an emission-reduction project in developing countries. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets. The United Nation for Climate Change Convention (UNCCC), the apex body of CDM projects, has developed two baseline and monitoring methodologies under which the T&D Loss reductions projects can be applied for CDM. They are: AMS IIA: Supply side energy efficiency improvements transmission and distribution; AM0067: Methodology for installation of energy efficient transformers in a power distribution grid. According to these methodologies, the implementation of Energy efficient measures for T&D loss reduction can include: Up-grading the voltage on distribution system; Replacing the existing transformers with a more efficient transformers; Also, other CDM project will include Energy Efficiency measures, implementation of CFL, rural electrification project using solar panels, etc. 8.4.6 Joint Ventures MGVCL could take advantage of the change in the market characteristics by leveraging its substantial operational experience in forging new JVs and business associations with private sector companies which will have the financial resources to set up new Greenfield projects, Generation plant from Renewable Sources to meet the Renewable Purchase obligation as well as to be a Partner with any local authority, Panchayat Institution, users' association, co-operative societies, nongovernmental organisations who intends to generate and distribute electricity in a rural area as specified in Section 13 and 14 of the Electricity Act 2003. MGVCL could bring to the table the advantage of having the experience in Retail Supply and Distribution of Power as well as the expertise of the technical people who have been April 2011 Page 106
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working at MGVCL plants for many years. Some of the areas where the public private participation can be attempted: Distribution Franchisee; O&M contracts; Metering, Billing and Collection (MBC); Distribution Infrastructure under Turnkey projects 8.4.7 Infrastructure upgradation As envisaged in the Capex Plan, MGVCL has planned for upgradation and strengthening of distribution network with viable funding plan. MGVCL planning to have a distribution system to withstand future load, provide quality and reliable supply and reduce system losses. This will result in increase in sales and decrease in the cost resulting in high revenue. 8.4.8 Competitive bidding Section 63 of the Electricity Act promotes the transparent process of bidding for procurement of power by the Distribution Licensees and subsequently, bidding guidelines have been issued by the Ministry of Power for long term procurement of power. Also, MoP has specified that distribution licensee has to procure power through bidding process from January 2011. MGVCL can through this process identify bidders across the country to source long term power for its licensed areas. 8.4.9 Non-Conventional Energy Considering the RPO issued by SERC / CERC and State Government initiative to harness the green energy, many activities has been initiated at the State level to develop the green project. Considering the importance of the renewable sector and the necessity of such power for the system and economic development of the State, MGVCL can tie up with the generator for commissioning of such plant and have a full capacity tie-up or can on its own develop such project. 8.5 Threats Emergence of Competition and new regulations could present serious threat to MGVCL if not managed well. Hence an appropriate plan has to be made to manage them well. 8.5.1 Regulatory risk MGVCL as a distribution licensee is regulated by GERC and has to approve the April 2011 Page 107
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regulatory norms to recover the cost from the consumers and directly affecting the liquidity position of MGVCL. The tariff decision is under the purview of GERC whereby the regulations provide for most cost to be on a pass through basis along with a reasonable return on equity component, the regulatory risk emanates from the fact that GERC impose stricter performance standards or disallow certain cost components that have resulted from the distribution licensees inefficiencies. Also, regulations such as Renewable Purchase obligation will result into the impact on the revenue of MGVCL. 8.5.2 High Sensitivity to Operational Variations In the regulated regime, MGVCL is only entitled to ROE and with a small equity base it means that any operational swings can adversely affect the financial condition of the company. Any disallowance by GERC will led to heavy borrowing for carrying out the operations of the company. Also, disallowances of expenses by the Honble Commission have an impact on the profitability of the company and the company does not have any other mechanism to recover these costs given the regulated nature of the business. 8.5.3 Deemed license to SEZ areas The Central Government have issued relevant policies such as SEZ Policy and Guidelines for Power generation, transmission and distribution in SEZ, where in it has stated that it is the prime responsibility of the developer to provide quality and continuous power supply to the consumers in their area. As per the Ministry of Commerce and Industry notification dated 3rd March 2010, it stipulates that a developer of SEZ shall be deemed to be a distribution licensee under clause (b) of Section 14 of EA 2003. These developments are a threat to MGVCL as SEZ areas are areas of growth and revenue potential and to that extent would be out of bounds for MGVCL. 8.5.4 Parallel license As per the Electricity Act 2003, a parallel licensee is possible to be operated whereby two licensees are supplying power in the same specified area. It might be possible that in future, other distribution licensee may get an approval to supply power in MGVCL area. In that case, there is a likelihood that the urban areas may witness competition due to parallel distribution licensees as these areas witness relatively less distribution losses and are marked by the non-existence of agriculture consumers and a willingness to pay on the part of their regular consumers resulting in cherry picking of area by such parallel licensee. The major issue is that the existing April 2011 Page 108
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licensees are already locked in long term power purchase contracts with fixed costs to be paid irrespective of off-take by these licensees. In view of this, the migration may lead to a situation where in the average power purchase cost is pushed upward by the fixed costs flowing from the PPAs and thereby further aggravating the situation with respect to the consumer level tariffs of the existing licensees, leading to further migration. Maharashtra and Jharkhand are few states in the country where parallel license is prevalent. Based on the judgement of the Supreme Court dated 8th July 2008 and the interim issued by the Honble Commission dated 15th October 2009, Tata Power Company (TPC- D) is a distribution licensee in Mumbai area except Mira Bhyander, which already has REL D and BEST as the distribution licensees. Similar arrangement in Gujarat may be considered as a Threat for MGVCL. While, there are issues of separation of wires and supply business, tariff related issues, operational issues etc, there is an inherent threat to MGVCL where it could lead to cherry picking of its urban areas. 8.5.5 Non Discriminatory Open Access With the opening of the power sector and the option available for consumers to get uninterrupted power through open access, there is a distinct possibility of the consumers, especially industrial consumers who have paying capacity to opt for other source of power. This could have an adverse impact on MGVCL as it will not only directly impact the revenue, but also affect the ratio subsiding consumers to subsidised consumers. This implies that the cross-subsidising consumers would reduce and further burden will increase on the rest of the consumers. It can be envisaged that there can be a direct power sale from generators to HT consumers in MGVCL area through open access. The open access to transmission would enable Generating Companies to sell directly to HT and large consumers eliminating middle distributors. This will be a negative scenario for the Company if it happens because close to half of its revenues are generated from HT and large consumers who are subsidizing domestic and agriculture consumers. As can be seen from the figure given below, nearly 41% of the revenue is from HT industrial hence open access is a major threat to MGVCL.
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Figure 23: Revenue breakup FY 2009-10
8%
Residential 21% Commercial Industrial LT
41% 10% 6%
11%
Public Water Works Agriculture Public Lighting Industrial HT Railway Traction
1%
2%
8.5.6 Railway Consumers to tie up with NTPC Railway provides 8% of the total revenue of MGVCL & there is a threat of this HT category of consumer on the basis of open access provision to tie up with NTPC for power. This is a major threat to the company which would lose a part of its revenue. 8.5.7 Locked in long term PPAs based on market projections MGVCL is locked in long term PPAs based on projections (category wise number of consumers, sales and connected load). But if these projections dont prove to be right may be due to competition in the sector or change in future market conditions, then MGVCL faces a risk of being tied up with the unsold capacity and hence would face loss on the fixed cost of power purchased.
Figure 24: MGVCL's SWOT Matrix
Helpful In achieving the objective the STRENGTHS Experienced Manpower Wide Spread Network Operation efficiency DSM Measures Novel Initiatives Uninterrupted Quality Power Supply Branding by rewards from MoP
Harmful In achieving the objective WEAKNESSES Commercial Arrangement Treatment of agricultural subsidy Irrational Tariff structure Ageing Distribution Infrastructure Ageing Employees
Internal Origin Attributes of Organisation
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OPPORTUNITIES Distribution Franchisee in areas/ other states Contracting Power supply New business Opportunities CDM benefits Ancillary Services Eliminating Peak Deficit Joint Ventures Competitive Bidding Non-conventional energy THREATS Rural Non Discriminatory Open Access Regulatory Risk & inconsistencies Deemed distribution licensee provision to SEZ area Parallel licensee Sensitivity to operational variations Railway Consumers to tie up with NTPC Locked in long term PPAs based on market projections
External Origin Attributes of the Environment 8.6
Summary of SWOT MGVCL has the advantage of having a large engineering base, experienced and skilled workforce but at the same time there are also issues like the upgradation of its existing network and updation on the technological front to cater to consumers needs. The T&D losses have to be reduces to match the international standards or atleast the standarand of the neighbouring Utiltites such AEC and SEC and theft of electricity should be drastically curbed. In order to be economically viable, MGVCL has to take effective measures to metered all the unmetered consumers and rationalize the tariff structure closer to the cost of supply. Regarding risks in the immediate future, introduction of competition would be the greatest issue. With mandatory open access and the thrust on providing choice to consumers through open access and parallel license becoming a reality, MGVCL will need to critically examine its ability to compete with other private players in the market. Risk Analysis of power distribution assets on behalf of a large power generation company, including analysis of regulatory framework and regulatory risks, performance benchmarks/ alternative performance based regulation, contractual risk with respect to shareholders agreement, acquisition and the loan agreement are part of statutory and regulatory risk. Also, Pricing of Open Access charges, Cross Subsidy Surcharge, wheeling charges and methodology for tariff determination, all of which will determine the total cost of served power is also one of the Regulaotry risk for distirbution utility.
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Going forward, MGVCL can target to improve its operations, lowering of O&M costs and better service at competitive prices to its subsidizing category of consumers
The growth path for MGVCL would be the key take homes which have emerged from the SWOT analysis. While, there would be opportunities galore on the horizon, it would be only prudent on part of MGVCL to first target the short-comings and overcome them. Simultaneously, it would also be necessary to start identifying areas which it intends to target in the short to medium term and which areas it intends to target in the long term. Targeting everything simultaneously would lead no-where.
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9. Risk Analysis
9.1
Background It is necessary to understand that how risks are perceived by the business. Virtually all organisations strive to survive. They strive to create value for their stakeholders including State Government, SERC, Consumers, Financial institutions, etc. They have the mechanism that allows them to respond their existing market environment and to anticipate changes that they may face. The risk can be identified as a financial risk, regulatory risk, operating risk, technology risk, etc.
9.2
Risk Assessment & Mitigation Plans
9.2.1 Improve efficiency: The spirit of the EA 2003 was to introduce competition in the electricity sector and therefore, in order to be competitive on the distribution segment, MGVCL has to improve operational efficiency. The efficiency can be achieved through reduction of losses, quality power supply and up gradation of network. There is also a need to introduce technological initiatives to improve performance and give customer better services both in terms of supply as well as cheaper power. To achieve such efficiency, MGVCL has undertaken following activities:
Figure 25: Risk Mitigation Plans
Infrastructure Plan Regulatory Awareness Reduce Losses
Employee Motivation
Distribution Franchisee
Recovery of Arrears Project Management & Execution
Improvement in Consumer Services
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A. Infrastructure Plan: The old and overloaded system often resulted in increase in distribution losses and affected the quality of service to the consumers. The ideal vision of MGVCL is to have a distribution system that runs smoothly: as system that could withstand future load, provide quality, reliable energy supply and reduce losses. MGVCL have also undertaken major technological initiatives whereby they are planning to provide a quality service to the consumers by way of Implementation of ERP, online customer care services. Various CAPEX schemes regarding substations & network augmentation, repair and maintenance are in place. RAPDRP scheme has been initiated & is providing system strengthening & actual energy accounting by SCADA implementation. B. Reduce losses: Total 136 Nos. Of 11 KV high losses feeders are selected for close monitoring for reduction of commercial & technical losses. For reduction in technical losses: LT line bifurcations, strengthening of LT lines, conversion of long single phase lines & equal load distribution between phases, Load balancing on transformer, 11 KV feeder bifurcation, HVDS etc are planned For reduction in Commercial losses: Replacement of faulty & old meters, shifting of meter outside the premises, replacement of deteriorated service lines having joints, insulation of HT & LT line crossing for Jyotigram & Agriculture dominant feeders, cross checking of meter readers activities are planned.
C. Distribution Franchisee Distribution Franchisee is a concept of business process outsourcing. It can range from simple arrangements from billing and collection processes to complex structure involving capital expenditure. Bhiwandi, a power loom city, also known as the Manchester of India, had typical problems like rampant theft and nonpayment. MSEDCL has already opted for a input based franchisee model for electricity distribution as envisaged in the Electricity Act2003. It handed over Bhiwandi circle to M/S Torrent Power on 26th January 2007. This experiment proved to be very successful and a trend setter in power distribution sector of the country.
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Based on this experience, MGVCL may decide to hand over some more loss making areas to private franchisees. D. Improvement in Consumer Services: Due to inclusion of Open Access and Parallel License under the amended Electricity Act 2003, a consumer of MGVCL will always have a choice to avail supply of electricity from any other Distribution licences other than MGVCL in case of proper service, continuous power supply or cheap power. This may result in loss of revenue for MGVCL as well as loss of subsidising consumers. As specified almost half (51%) of MGVCLs revenue comes from the Industrial HT & LT category. And a shift in this category of consumers to a competitive player would result in a huge loss to the Discom. Therefore, MGVCL is planning and already initiated to undertake following measures to mitigate the risk of losing consumers: 24 X 7: Customer care centre for best services; Any time payment by customers through cash / cheque / DD / pay-order through multi-media based system. Energy Bill Collection Mobile Van from consumer's door step. Identification of Bill collection agencies. A user-friendly, compact and low-cost Hand Held Terminal for field applications for meter reading results in spot billing. Explanation of each parameters in the bill on the website for clearance of any doubt of consumers related to billing.
E. Project Management and Execution A key element of the implementation of infrastructure plan is to execute project on a timely manner and is managed in a judicious way. In order to meet the above investment objectives & improving the existing infrastructure of Distribution System, MGVCL needs to review the timely implementation and completion of Infrastructure plan. It has to ensure the Quality Control, as well as there should be a regular monitoring of the progress of the projects. MGVCL has to undertake a comprehensive planning exercise to formulate plans and strategies to achieve these commitments. Therefore, the same can be April 2011 Page 115
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undertaken by following the outlined measures which will result in an quality output and better infrastructure on a timely basis: Design, Development and implementation of an Integrated Project Management Information System; Regular monitoring of the progress of the projects and establish a feedback mechanism; Training of MGVCL Staff; Liasioning with REC/PFC or any financial institution for availing financial assistance; Liasioning with GERC;
F. Recovery of Arrears Even though MGVCL has a collection efficiency of 100%, still there are some arrears which need to be targeted and collected. These dues of Rs 345.66 Crores are from Governmental companies and large unrecovered agriculture dues. Certain receivables are also on account of issues in metering, billing and collection issues which are required to be tackled by MGVCL on a war footing. Also additional drives to be planned to be undertaken by MGVCL are as follows: Implementation of pre-paid meters; Disconnection drive : Biggest tool available; RCI consumers in Arrears: List to be obtained from IT department; ABC analysis to be carried out e.g. there might be 20% consumers having 80 % arrears. Instead of disconnecting 80% consumers with 20% arrears, priority to be for consumers with higher arrears.
G. Anti-Theft Measurement Continuous efforts are being made for prevention of theft of energy. The vigilance team of the company carried out intensive inspection drives during the year 2009-10. 3,17,889 connections were checked under the Installation Checking drives and 7347 connections were detected for theft and malpractice with total assessment of Rs 673 lacs and total recovery of Rs 516 lacs. Arial Bunch Conductor ABC in place of bare conductor in theft prone areas to reduce pilferage of energy by direct hooking XLPE coated service line in zupadpatti/ low income areas to eliminate theft by Page 116
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tapping of service lines. Pole mounted metering system: in order to avoid power theft, meter is mounted on the pole & display part installed at consumer premises.
H. Employee Motivation There is an issue of existing employees leaving the organization, in view of the opportunities available in power sector with the opening of the power sector as well as Man-power planning. The Company is not in an advantageous position to retain its professional/ technical staff given the budgetary constraints of compensation that it can pay. Moreover it is also not able to attract the best talent in the country for the same reasons. Hence a proper Human Resource management system needs to be in place in order to have a transparent screening, recruitment & selection procedure along with skill enhancement drives for training & development of the employees I. Regulatory awareness In the previous sections MGVCL has cited its vulnerability to regulatory decision making process as an area of concern and the risk related to it. However, it also recognises that this is an area which it will have to proactively deal with to minimise the kind of regulatory risk that it perceives. MGVCL feels that better coordination and interaction between the Honble Commission may be helpful in alleviating the situation to a large extent. Further, while it would be the duty of the company to meet the performance levels set by the Honble Commission, it is felt that a more realistic approach has to be adopted by the Honble Commission while fixing the performance parameters. MGVCL is ready to go all out to assist the Honble Commission in the matter as the same would be beneficial for both the company and the consumers who have to finally bear the consequences of the financial implication on the company. In the rapidly changing power sector scenario and based on the opportunities available in the market, going forward the company is considering to achieve their Vision, Mission and Values as determined in earlier chapters.
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10. Future Business Opportunities MGVCL being a deemed distribution licensee has an obligation to supply quality and continuous power. In its endeavour to provide the quality power supply, MGVCL has already initiated a plan to revamp the distribution infrastructure to meet the growing needs of the State. Accordingly, GSEC and GUVNL (power allocated by GUVNL to MGVCL), has also simultaneously taken up several capacity addition projects in terms of expansion at existing locations as well as Greenfield projects and some of the renovation and modernisation of its existing units with a view to bring in energy efficiency and life extension. Also, in relation to harnessing the green energy and to meet the RPO as directed by the Honble Commission, MGVCL has to contemplate to tie up the additional capacity in the areas of New and Renewable Energy Sources particularly. MGVCL has already undertaken the robust infrastructure plan and planning to implement with a target to achieve efficiency in operation and to provide quality and continuous power supply to the consumers. To achieve this said objective, challenges in terms of financial and human resources, drive the need for MGVCL to review and realign its strategy based on the availability of the desired resources so as to be able to sustain the desired level of growth and expansion in a competitive environment. It is submitted to the Honble Commission that usually the project funding is in the debt :equity ratio of 80:20 or 70:30 (which is in line with the GERC Tariff Regulations, 2005) whereby the portion of equity used to be contributed by State Government. However, it is necessary for MGVCL to look at alternate sources instead of continued dependence on the support from GoG. In order to raise resources, MGVCL can consider the following options: Equity Financing from Capital Market - Initial Public Offer (IPO); Public Private Partnership - Creation of Special Purpose Vehicles (SPVs) / Joint Ventures; Also, in terms of business opportunities that MGVCL could target in the future, the SWOT analysis has helped identify the following: Public Private Partnership (PPP); Renewable Source Energy; Providing Ancillary Services to other power sector players; April 2011 Page 118
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While, the above mentioned Business Opportunities have emerged, the first two related to Public Private Partnership for expansion and Greenfield project, Generation tie-up by focus on non-conventional energy sources and providing other ancillary services would be the focus areas in the short to medium term. Therefore, the other opportunities would be looked at in the long terms which are being detailed out in the following paragraphs. Also, the other areas where MGVCL has to focus on a serious note to target in future to provide the services to the consumers as well as to be rational in collection of charges are as follows: Proactive tariff rationalisation; Sustained political support; Commercial orientation; Autonomy of management; Commitment to customer service; Capacity development in organisations; Responsiveness to regulatory directions; Improving the data environment; Better metering and energy accounting; Employee accountability and recognition; Focus on efficiency;
10.1 Public Private Partnership 10.1.1 MGVCL has the option to get equity financing for new projects through the Public Private Partnership (PPP) route by establishing a Joint Ventures (JVs) or by creation of SPVs with suitable private sector partners. This will also leverage private sector efficiencies for speedy and cost effective implementation of the projects. Also, the JV partners would be able to bring in other resources, including the ability to obtain statutory clearances expeditiously. The Joint Ventures will be formed with such strategic partners who can bring in the relevant experience, capabilities and expertise in the relevant areas. 10.1.2 The PPP models vary from short-term simple management contracts (with or without investment requirements) to long-term and very complex BOT form, to divestiture. These models vary mainly by: Ownership of capital assets April 2011 Page 119
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Responsibility for investment Assumption of risks, and Duration of contract
10.1.3 The desired synergy from the joint venture and suitable bidding parameters will be evolved for the purpose of selecting the JV partner through bidding process. Some of the areas where the public private participation can be attempted: Distribution Franchisee in high distribution loss area; O&M contracts; Distribution Infrastructure under Turnkey projects 10.2 Ancillary Services 10.2.1 MGVCL can in future look at other services relating to Operations & maintenance activity, Testing facilities, Research & Development, Training, Technical consultancy, etc. There is a need to introduce R&D activities relating to International Technology trend, effect of use of advance technology in distribution, etc. This can be useful to improve the overall efficiency of the operations as well as helpful for Training of employees. 10.2.2 MGVCL can also undertake training programs at its training centres for other utilities which can earn revenue for MGVCL. MGVCL in future can utilize the skills of their experienced technical persons in providing consultancy services to third parties who are interested or already involved in the Distribution segment of the power sector. MGVCL has capable staff for handling O&M activities of a distribution project as well as providing the project management assistance. 10.2.3 There are many new entrants in the power sector who would be interested in distribution projects for the first time or companies that do not have the required expertise to handle such activities on a large scale. MGVCL can undertake such O&M activities and enhance its revenue earning potential. This can have a two-fold advantage of helping MGVCL with an extra revenue stream as well as giving exposure to newer technologies that might be adopted by private firms at new and upcoming projects 10.3 Professional Meter Testing Facility MGVCL has its Hi-Tech Meter Testing Laboratory at Baroda Circle with high tech testing bench made in Germany. This facility can be utilised for providing meter testing of other Utilities, Meter manufacturers and other bulk energy consumers. Page 120
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10.4 Non Conventional Energy 10.4.1 MGVCL in support with GUVNL has to initiate an activity on harnessing renewable source of energy. Right now GUVNL is looking after the non conventional initiatives, but to fructify the plans for significant expansion, a new department/ division under MGVCL might be needed to be created with the aim of harnessing non conventional energy. 10.4.2 However to meet the Renewable Purchase Obligation as directed by the Honble Commission, MGVCL may consider PPP model for commissioning of the Generation Plant under such source of energy. The main characteristic of PPP is that there is a creation of a Special Purpose Vehicle and the risks in the project are assigned to the party that is best suited to handle the risk. This creates a win-win situation for both the participating parties, as the project is delivered on-time within the allocated budget, in contrast to the delays and cost-over-runs in case only the Government undertakes such project. Depending on the risk-allocation, PPP projects can be of many types, a few of them are Build-Operate-Transfer (BOT), Build-Operate-OwnTransfer (BOOT), Build-Operate-Lease-Transfer (BOLT). 10.4.3 Public Private Partnership can get easy and priority-financing by financial-bodies and can address the major concern of financing of such projects. A PPP also has immunity from changing government-policies, after a fixed policy framework is put in place. It also takes the local community and land owners into confidence and hence avoids running into trouble from their side. The unique characteristic of PPP project is its intime completion, which avoids cost-overruns. A Public Private Partnership will also have an economically viable tariff plan through Power Purchase Agreement, thus reducing the revenue-risk in the process. Considering these benefits associated with Public Private Partnership, it is imperative that MGVCL is planning to go for the PPP route in setting up of such renewable power projects. 10.5 Distribution Franchisee Route MGVCL is one of the best utilities in the country and is independently handling all its operations except power purchase. It can leverage its skilled man power & experience in the field of distribution & acquire distribution franchisees in areas other than that of Gujarat. It would help the utility to earn extra revenue by utilizing its area of excellence. Future Plans in Other areas To achieve the plan of MGVCL as well as to follow the Vision and Mission in a way to April 2011 Page 121
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achieve goals, there is a need to strengthen the working of the Organization in order to enable it to implement its future Plans. Therefore, it is required to initiate the development on the Organizational front, namely HR related and Information Technology related. 10.6.1 Human Resources Development Plan HR Department is preparing proposal on succession planning for the leadership positions of the company & planning leadership development program for the key officials of the company. 10.6.2 Future IT Initiatives For office automation and intelligent analytical reports generation for efficient resources & network management, Web based information system using business intelligence and artificial intelligence tools having data warehousing and data mining technologies are envisioned for future activities of the company. The company has initiated various IT enabled projects, E- Urja project as ERP solution and on line internet energy bill e-payment, centralized single window operational Customer Care Centre (CCC) with Interactive Voice Response system (IVRS), web self service and other state of the art technologies. Consumer Meter Reading through GPRS enables bill calculation at central server in real time mode with precise and prompt meter reading and billing, enhance consumer satisfaction and revenue flow. The company is in process of procuring GPRS based Hand Held Equipment (HHE) for meter readers covering all field offices. Baroda city circle is chosen as pilot site, and to be expanded to all the circles of the company in phase. 10.6.3 Future Plan of Action (for System Improvement) Cable and Conductor measuring instruments are proposed for all four circles of the company Total 136 Nos. of 11 KV high losses feeders are selected for close monitoring for reduction of commercial 7 technical losses. SCADA system in Vadodara City will be upgraded. Pilot project is initiated for installing roof type solar power system in five sub division offices of the Company.
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11. Operational Plan
MGCVL has prepared the Business / Operational Plan taking cognisance of the existing internal factors and external business environment affecting the business of MGVCL. It is submitted that the Business plan being a dynamic document may need to be updated at periodic intervals taking into account the changes in the internal and external environment and these changes would be intimated to the Honble Commission from time to time. The operational plans include the estimates of each cost of MGVCL for the second control period (from FY 2011-12 to FY 2015-16) and are in line with the MYT petition. The costs are estimated based on certain assumptions, past trend and extrapolated for future period. Estimation of ARR for second control period FY 2011-12 to 2015-16 The components for the calculation of total expenses for the MYT petition under the second control period FY 2011-12 to 2015-16 are as follow: Power Purchase Cost Operation & Maintenance Cost Interest on Loan and Financial Charges Interest on Working Capital Provision for Bad Debts Other Expenses Capitalized Return on Equity Provision for Tax It has been observed from past experience that the historical trend method has proved to be a reasonably accurate and well accepted method for estimating the load, number of consumers and energy consumption. In light of the above, MGVCL has estimated the above for various customer categories primarily based on the CAGR trends during past years. Wherever the trend has seemed unreasonable or unsustainable, the growth factors have been corrected by the company, to arrive at more realistic projections Approach for Calculation of Energy Balance To arrive at the energy requirement, the total demand in MUs as projected above has been considered. This has been grossed up by factoring in transmission and April 2011 Page 123
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distribution losses to arrive at the gross demand for the company. It may be noted that transmission losses are assumed as per the projection given by GETCO in its MYT petition for second control period FY 2011-12 to 2015-16 and difference between actual losses of GETCO & SLDC that is 0.49% for FY 2009-10. Once the gross requirement is known, the purchase of units from each plant has been arrived at by preparing a Merit Order for each year. Fixed cost & Variable cost for GSECL has been taken as approved by the Honble Commission for FY 2011-12 during GSECL MYT order dated 11th April, 2011. For IPP and Central sector, fixed cost and variable cost is taken as per actual of FY 2009-10. 11.1 Sales Growth For projecting the sales, no. of consumers and connected load for FY 2011-12 to 2015-16, the base number of FY 2009-10 is considered. The table given below shows the growth rate projected for sales, connected load and number of consumers for various categories of consumers
Table 18: Projection of growth in Sales, Load & Consumer base for FY 2011-12 to 2015-16
S a le s ( M U ) Lo w T en sio n C o n su m e rs R e s i d e n ti a l C o m m e rc i a l I n d u s t ri a l L T P u b l ic W a te r W o rk s A g ri c u l t u re - M e te r e d S tre e t L ig h t LT T o ta l H ig h T en sio n C o n su m e rs I n d u s t ri a l H T R a ilw a y T ra c tio n H T To ta l TO T A L 1 0 .0 7 % 1 3 .1 4 % 7 .2 3 % 9 .1 9 % 6 .4 2 % 9 .0 8 % 9 .0 6 % 7 .7 1 % 8 .8 7 % 9 .0 0 % 7 .7 6 % 6 .5 8 % 7 .9 0 % 0 .0 0 % 7 .8 6 % 6 .5 8 % N o. of Co n su m e rs 6 .9 7 % 3 .1 4 % 4 .0 0 % 6 .3 3 % 7.0 0% 8 .08 % 9.6 5% 3.8 3% 9 .08 % 8 .29 % Co n n ec te d L o a d (M W ) 8.7 3% 9.4 3% 6.5 6% 2.7 9%
11.2
Distribution Losses The company has achieved a significant reduction in distribution losses, during recent years. These efforts shall continue and will be enhanced. However, loss reduction is a slow process and becomes increasingly difficult as the loss levels come down. In view of this, it is assumed that the distribution loss in FY 2011-12 to 201516 will reduce but with rate. Projection of distribution losses for second control period FY 2011-12 to 2015-16 are as shown below:
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Table 19: Distribution Loss trajectory FY 2011-12 to 2015-16
Particulars Distribution Loss FY 2011-12 (Projected) 12.75% FY 2012-13 FY 2013-14 FY 2014-15 (Projected) (Projected) (Projected) 12.50% 12.25% 12.00% FY 2015-16 (Projected) 12.00%
11.3
Energy Balance The energy requirement for Company will be met by supply from GUVNL. Based on the information provided above, Energy Balance of the Company for the second control period FY 2011-12 to 2015-16 is as shown below:
Table 20: Energy Requirement Projection FY 2011-12 to 2015-16
S.No. 1 2 3 4 5 6 7 Energy Sales
Particulars
Unit MUs MUs % MUs MUs % MUs MUs MUs
Dis tribution Losses Energy Requirement Transmission Losses Total Energy to be input to Transmission System Pooled Losses in PGCIL System Total Energy Requirement
FY 2011-12 (Projected) 7,235 1,057 12.75% 8,292 386 4.45% 8,678 109 8,787
FY 2012-13 (Projected) 7,885 1,126 12.50% 9,011 415 4.40% 9,426 157 9,583
FY 2013-14 (Projected) 8,592 1,200 12.25% 9,792 445 4.35% 10,237 211 10,448
FY 2014-15 (Projected) 9,363 1,277 12.00% 10,640 478 4.30% 11,118 245 11,363
FY 2015-16 (Projected) 10,204 1,391 12.00% 11,595 521 4.30% 12,116 267 12,383
11.3.1 Bulk Supply Tariff In order to envisage a uniform tariff across all the Discoms a Bulk Supply Tariff has been envisaged for the state. In order to minimize the power purchase cost, a single Merit Order Dispatch (MOD) is run for all the Discoms. The NPC power plants, renewable plants & hydro power plants viz. SSNNL Hydro, NPC Tarapur and Ukai Hydro have been considered as must-run power plants and so they have been excluded from merit order calculations. The dispatch from individual generating stations is worked out based on the merit order of the variable cost of each generating unit. RLNG gas based plants are run at 30% availability for the FY 2011-12 & then at 5% for the rest of the control period. 11.4 Power procurement from various sources Given below is the Power procurement from different sources of power generation for MYT second control period i.e. from FY 2011-12 to 2015-16
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Table 21: Availability from Existing Plants
Rated Auxillary Capacity Plant Load Fixed Cost Allocated to Consumpti Factor (%) (Rs Crs) on (%) GUVNL (MW) 850 305 660 210 1,260 210 240 215 75 242 75 91 94 295 242 391 82 250 126 21 250 250 160 125 274 360 230 239 266 143 181 232 141 273 96 22 782 229 30 9 58 264 60 80 16 18 83 30 21 44 56 8 9.00 0.70 10.00 9.00 9.00 9.00 11.00 12.00 12.00 1.19 4.00 3.00 3.00 3.00 3.00 2.90 2.90 10.00 2.90 2.90 10.00 10.00 10.00 12.50 10.00 7.93 9.00 7.50 7.50 3.00 3.00 0.50 7.50 6.50 6.50 3.00 2.90 4.00 3.00 3.00 3.00 2.90 2.90 2.90 3.00 3.00 75% 13% 79% 85% 85% 85% 68% 66% 75% 0% 6% 80% 80% 80% 80% 70% 70% 80% 75% 80% 80% 75% 80% 80% 80% 80% 85% 85% 85% 85% 85% 85% 14% 85% 85% 85% 23% 23% 23% 80% 70% 70% 70% 80% 80% 80% 80% 80% 80% 80% 85% 85% 80% 247 24 266 97 366 95 122 222 129 61 29 48 57 229 202 307 27 158 101 11 203 158 74 58 98 165 58 101 172 192 102 49 208 23 62 8 11 27 24 12 18 31 Variable Cost (Rs/kWh)
Sr. No
Particulars
GSECL Plants: 1 Ukai TPS 2 Ukai Hydro 3 Gandhinagar I to I V 4 Gandhinagar V 5 Wanakbori I to VI 6 Wanakbori VII 7 Sikka TPS 8 Kutch Ligni te I to I II 9 Kutch Ligni te IV 10 Dhuvaran oil 11 Kadana Hydro 12 Utran Gas Based 13 Dhuvaran Gas Bas ed - Stage-I 14 Dhuvaran Gas Bas ed - Stage-II 15 Utran Extensi on IPPs: 1 ESSAR 2 GPEC 3 GIPCL II (160) 4 GIPCL-SLPP 5 GSEG 6 GIPCL - I (145) 7 GMDC - Akrimota 8 GIPCL, Expans ion Central Sector: 1 NPC - Tarapur- 1&2 2 NPC - Kakrapar 3 NPC - Tarapur- 3&4 4 NTPC - KORBA 5 NTPC - VINDHYACHAL - I 6 NTPC - VINDHYACHAL - II 7 NTPC - VINDHYACHAL - III 8 NTPC - KAWAS 9 NTPC - JHANOR 11 SSNNL - Hydro 12 NTPC - Kahalgaon (New) 13 NTPC - Si pat Stage-II 14 NTPC - KORBA II Renewables: 1 Wind Farms (1.75) 2 Wind Farms (3.37) 3 Wind Farms (3.56) 4 Biomass 5 Hydro RLNG Capacity @15%: 1 Shapoorji Pallonji 2 ESSAR - 300 3 GPEC - 655 4 Utran Gas Based - 135 5 Utran Extens ion - 375 6 Dhuvran Gas Bas ed - Stage 1 - 107 7 Dhuvran Gas Bas ed - Stage 2 - 112 8 GIPCL II (160) - 165 9 GSEG - 156 10 GIPCL - I (145) - 42 11 NTPC - JHANOR - 237 Others: 1 Captive Power Plant (MU)
1.71 0.00 2.38 2.13 2.11 2.02 2.77 1.18 1.11 0.00 2.37 2.41 2.39 2.07 2.95 2.40 1.95 1.14 1.77 2.15 0.74 1.14 0.95 2.19 2.32 0.76 1.27 1.23 1.21 2.32 2.14 2.05 1.78 0.88 0.72 1.75 3.37 3.56 4.40 3.52 5.21 5.77 4.96 5.26 5.26 5.49 5.21 5.49 5.59 5.59 3.64
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Table 22: Availability from New Plants
Rated Fixed Variable Plant Load Factor (%) Capacity Auxillary Cost (Rs Cost Allocated Consump Crs) (Rs/kWh) to GUVNL tion (%) FY 2011- FY 2 012- FY 2013- FY 2014- FY 2015(MW) 12 13 14 15 16 800 500 500 360 500 500 476 140 540 240 260 240 174 240 1805 300 944 25 2000 200 1000 1010 800 800 351 700 9.00 8.50 8.50 3.00 10.00 11.00 12.50 8.50 7.50 6.50 6.50 6.50 6.50 6.50 3.50 3.50 0% 0% 0% 0% 0% 0% 0% 0% 47% 4% 0% 0% 0% 0% 9% 0% 2% 5% 70% 7% 13% 0% 0% 0% 7% 3% 0% 80% 7% 0% 0% 0% 0% 0% 85% 67% 0% 7% 4% 0% 16% 0% 11% 20% 80% 80% 73% 0% 0% 0% 80% 63% 0% 80% 80% 3% 0% 7% 0% 0% 85% 85% 19% 85% 67% 0% 17% 1% 20% 20% 80% 80% 80% 0% 0% 0% 80% 80% 0% 80% 80% 63% 7% 80% 0% 0% 85% 85% 73% 85% 85% 0% 48% 35% 20% 20% 80% 80% 80% 0% 0% 0% 80% 80% 85% 80% 80% 80% 80% 80% 7% 7% 85% 85% 85% 85% 85% 7% 80% 80% 20% 20% 80% 80% 80% 73% 73% 73% 80% 80% 673 401 401 329 315 390 170 421 242 169 287 102 470 1,448 143 1,634 226 820 1,023 798 798 238 473 1.60 1.54 1.99 3.39 1.14 1.20 2.89 1.31 0.88 0.89 0.81 0.87 0.89 1.05 0.91 0.95 15.00 11.00 1.43 0.55 1.27 0.62 1.38 1.38 5.00 5.00
Sr. No
Particulars
GSECL Plants: 1 Wanakbori Expansion 2 Ukai Expansion 6 3 Sikka 3 & 4 4 Dhuvara n CCPP Ext - 3 IPPs: 1 GIPCL Addition 2 BECL Central Sector: 1 NPC kakrapar addition 2 NTPC - Lara 3 NTPC - Sipat Stage - I 4 NTPC - Mauda STPS-I 5 NTPC - Barh STPS-I 6 NTPC - Vindhyachal STPS-IV 7 NTPC - Barh STPS-II 8 NTPC - Mauda STPS-II 9 Mundra UMPP 10 Tilaiya UMPP Renewables: 1 Solar Photovoltic 2 Solar Thermal Competitive Bidding: 1 APPL 2 Aryan 3 Essar - 1 000 MW 4 Wardha Power - KSK Mahanadi Power Co 5 Essar - 8 00 MW Shapoor ji Pallonji RLNG Capacity @15%: 1 GSEG Ex pansion 2 GSPC-Pi pavav
11.5
Power Purchase cost for FY 2011-12 to 2015-16
11.5.1 Transmission Charges The transmission charges of GETCO are calculated as per the approved charges from GETCO Order for second control period FY 2011-12 to 2015-16, dated 31st Mar 2011. PGCIL charges worked out based on actual of FY 2009-10 with escalation of 5% every year. 11.5.2 GUVNL Cost GUVNL is entrusted with the operation of supplying power to bulk licensees and the overall coordination between its subsidiary companies. It also undertakes the function of raising and managing the overall loan portfolio of GUNVL and its subsidiaries. As a trading company, GUVNL is charging Rs. 0.04 for every transaction of unit. 11.5.3 SLDC Fees & Charges SLDC fees & charges are taken as per the approved from the SLDC Order for MYT second control period FY 2012-16, dated 31st Mar, 2011. April 2011 Page 127
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11.5.4 Trading GUVNL has projected trading of surplus power based on its capacity to sell. For FY 2011-12, 6000 MUs have been considered which would be increased by 1000 MUs each year. GUVNL charges Rs 1 for each unit transacted as a profit and trading margin. 11.5.5 Total Power Purchase Cost The total power purchase cost for GUVNL for the second control period FY 2011-12 to 2015-16 comes to the power purchase cost through merit order, transmission charges, GUVNL charges and SLDC Fees & charges, as shown below:
Table 23: Power Purchase Cost Projection FY 2012-16
Year FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 Discom Discom Total Power Trading Profit & Total Trading Trading Fixed Fixed Cost Variable Cost Purchase Cost Variable Cost Trading Margin Revenue (Rs Cost (Rs Cr) (Rs Crs) (Rs Crs) (Rs Crs) (Rs Crs) (Rs Crs) Crs) 8,125 11,126 12,473 13,902 18,356 11,348 11,793 13,233 13,850 13,702 19,473 22,919 25,705 27,752 32,059 798 1,203 1,451 1,713 2,358 1,115 1,275 1,540 1,706 1,760 600 700 800 900 1,000 2,513 3,177 3,791 4,319 5,119 Net Cost (Rs Crs) 18,075 21,016 23,454 25,139 28,700
11.6
Capital Expenditure
11.6.1 The scheme-wise projected capital expenditure for the MYT petition under second control period from FY 2011-12 to FY 2015-16 is as shown below:
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Table 24: CAPEX Projection FY 2011-12 to 2015-16
Rs in Crores Sr No A Schemes Distribution Schemes Normal Devel opment Scheme System Improvement Scheme Electri ci ty of Hutments Kutir Jyoti Scheme Tri bl e Vi ll ages Total Rural Electrification Schemes TASP (Wel ls and Petapara) Special Component plan RE Normal Well s Total Others Energy Conservation Sagar Khedu Total Non Plan Schemes SCADA RAPDRP (Part A) RAPDRP (Part B) RGGVY DRUM Total New Innovative Schemes Line Capacitors Aerial Bunch Conductors HVDS i n selected sub-divisi on Automatic meter reading GIS i n ci ti es Automation and Computeri zati on Customer Care Centre Under Ground Cabl es Repl acement of Conductors/TC Mi sc. Ci vi l + Electri cal Works Other New Schemes Urban Devel opment Govt. School Electri ficati on (General ) Total Capital Expenditure Total FY 2011-12 (Projected) 41 8 20 2 71 61 1 19 80 3 2 5 55 6 61 3 7 1 0 5 1 4 9 3 33 250 5 1 3 10 4 34 248 0 5 1 3 10 4 34 255 FY 2012-13 (Projected) 41 8 20 2 71 61 1 19 80 3 2 5 58 58 3 7 1 0 5 1 3 11 4 35 204 FY 2013-14 (Projected) 42 8 20 2 72 61 1 19 80 3 2 5 65 65 3 7 1 0 5 1 3 11 4 35 200 FY 2014-15 (Projected) 42 8 20 2 72 61 1 19 80 3 2 5 13 13 3 7 1 0 9 9 3 7 1 FY 2015-16 (Projected) 42 8 20 2 72 61 1 19 80 3 2 5
11.7
Funding of CAPEX
11.7.1 The funding of above mentioned Capital Expenditure is envisaged through various sources categorised under four headings namely: Consumer Contribution, Grants, Equity and Debt. The grants have been considered based on the figures available with the companies. The remaining expenditure is proposed to be funded through debt and equity in the ratio of 70:30. The detailed breakup of funding of capital expenditure during MYT for second control period FY 2011-12 to 2015-16 is mentioned below.
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Table 25: Funding of CAPEX FY 2011-12 to 2015-16
Rs in Crores Sr. No. 1 2 3 4 5 6 Particulars Capi tal Expendi ture Less : Consumer Contri bution Grants Balance CAPEX Debt @ 70% Equity @ 30% FY 2011-12 (Projected) 250 36 125 88 61 26 FY 2012-13 (Projected) 248 37 126 85 59 25 FY 2013-14 (Projected) 255 37 129 89 63 27 FY 2014-15 (Projected) 204 37 112 55 39 17 FY 2015-16 (Projected) 200 37 110 53 37 16
11.8
Operation & Maintenance Expenses
11.8.1 The O&M expenses consist of Employee cost, Administration & General Expenses, Repair and Maintenance expenses, Other Debits, Extraordinary Items, and Net Prior Period Expenses and other expenses capitalized. The O&M expenses during MYT second control period FY 2011-12 to 2015-16 are as below:
Table 26: O&M Expenses Projection FY 2011-12 to 2015-16
FY 2011-12 (Projected) 222 40 39 7 0 15 (54) 269 FY 2012-13 FY 2013-14 (Projected) (Projected) 234 248 42 45 41 43 8 8 0 0 16 17 (57) (61) 284 301 FY 2014-15 (Projected) 262 47 46 9 0 18 (64) 318 Rs in Crores FY 2015-16 (Projected) 277 50 48 9 0 19 (68) 336
Sr. No. 1 2 3 4 5 6 7 8
Particulars Employee Cost Repai r & Maintenance Adminis trati on & General Charges Other Debits Extraordinary I tems Net Prior Period Expenses / (I ncome) Other Expens es Capitalis ed Operation & Maintenance Expenses
11.9
Provision for bad and Doubtful Debts
11.9.1 Provision for bad & doubtful debts is considered at 0.20% of the revenue from sale of power. It is a very legitimate expenditure which is associated with the business risk and is a consumer related expense as the MGVCL is in a distribution business. MGVCL accordingly, has projected Provision for Bad & Doubtful Debts for the MYT second control period FY 2011-12 to 2015-16 as follows:
Table 27: Bad Debts Projection FY 2011-12 to 2015-16
Rs in Crores Sr. No. 1 Particulars Provision for Bad Debts FY 2011-12 (Projected) 6 FY 2012-13 (Projected) 6 FY 2013-14 (Projected) 7 FY 2014-15 (Projected) 7 FY 2015-16 (Projected) 8
11.10 Depreciation 11.10.1 April 2011 MGVCL has considered the Closing Gross Block of Fixed Assets of FY 2010-11. Page 130
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The projected assets addition in FY 2011-12 has been considered to arrive at the estimated Gross Block in the beginning of the FY 2012-13 and thereof. The addition during the MYT second control period FY 2011-12 to 2015-16 has been projected considering projected capital expenditure plan for the same for each year. Depreciation has been calculated taking into consideration the opening balance of assets in the beginning of the year and the projected capitalisation. The GERC regulations specify that the CERC rates have to be used for computation of the depreciation to be charged during the year. The projected depreciation for MYT for second control period FY 2011-12 to 2015-16 is as shown below:
Table 28: Depreciation Projection FY 2011-12 to 2015-16
Rs i n Crores Sr. No. 1 2 3 4 Particulars Gross Bl ock i n Beginning of the year Addi ti ons duri ng the Year (Net) Depreciation for the Year Average Rate of Depreciation FY 2011-12 (Projected) 2,178 250 121 5.25% FY 2012-13 (Projected) 2,428 248 134 5.25% FY 2013-14 (Projected) 2,676 255 147 5.25% FY 2014-15 (Projected) 2,932 204 159 5.25% FY 2015-16 (Projected) 3,136 200 170 5.25%
11.11 Interest on Loan 11.11.1 The interest expenditure on account of long-term loans depends on the outstanding loan, repayments, and prevailing interest rates on the outstanding loans. Further, the projected capital expenditure and the funding of the same also have a major bearing on the long-term interest expenditure. 11.11.2 The interest on the opening loans has been computed considering the weighted average rate of interest for the last year and @ 10.50% on the new loans drawn during the year. 11.11.3 The figure of Guarantee has been taken at the same level as the projected figures of FY 2010-11. MGVCL submits that it has been allocated some Govt. of Gujarat Guarantees, where it is required to pay the guarantee charges. These are the legacy loans which have come from the erstwhile GEB. These charges are, thus, beyond control of MGVCL and hence require to be considered in the total financial cost. 11.11.4 The Interest and Finance Charges for MYT second control period FY 2011-12 to 2015-16 is projected as tabulated below.
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Table 29: Interest & Finance Charges Projection FY 2011-12 to 2015-16
Rs i n Crores Sr. No. 1 2 3 4 5 6 7 7 8 Particulars Opening Loans Loan Additi ons duri ng the Year Repayment duri ng the Year Closi ng Loans Average Loans Interes t on Loan Interes t i n Security Depos it Guarantee Charges Total Interest & Financial Charges FY 2011-12 (Projected) 303 61 121 243 273 30 20 1 51 FY 2012-13 (Projected) 243 59 134 169 206 22 20 1 44 FY 2013-14 (Projected) 169 63 147 84 126 14 20 1 35 FY 2014-15 (Projected) 84 39 159 (36) 24 3 20 1 24 FY 2015-16 (Projected) (36) 37 170 (170) (103) (11) 20 1 10
11.12 Interest on Working Capital 11.12.1 The rate for calculation of interest on working capital has been considered as per SBAR on 1st April 2011, which is 11.75%. MGVCL has used the same for computing the interest on working capital for MYT second control period FY 2011-12 to FY 2015-16 as shown below:
Table 30: Interest on Working Capital Projection FY 2011-12 to 2015-16
Rs in Crores Sr. No. 1 2 3 4 5 6 Particulars O & M expenses Mai ntenance Spares Receivables Total Working Capital Rate of Interest on Working Capital Interest on Working Capital FY 2011-12 (Projected) 24 25 294 342 11.75% 40 FY 2012-13 (Projected) 27 29 342 397 11.75% 47 FY 2013-14 (Projected) 30 33 385 448 11.75% 53 FY 2014-15 (Projected) 33 37 419 489 11.75% 57 FY 2015-16 (Projected) 37 41 479 557 11.75% 65
11.13 Return on Equity 11.13.1 The return on equity has been computed @ 14% on average equity based upon the opening balance of equity and normative additions during the year, which has been arrived at by considering 30% of the capital expenditure net of consumer contribution and grants as funded from equity as already explained above. Accordingly, the normative return on equity for MYT second control period FY 201112 to 2015-16 is as shown below:
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Table 31: Return on Equity Projection FY 2011-12 to 2015-16
Rs in Crores Sr. No. 1 2 3 4 5 6 Particulars Openi ng Equi ty Capital Equity Addi tions duri ng the Year Clos ing Equity Average Equity Rate of Return on the Equi ty Return on Equity FY 2011-12 (Projected) 491 26 517 504 14% 71 FY 2012-13 (Projected) 517 25 543 530 14% 74 FY 2013-14 (Projected) 543 27 570 556 14% 78 FY 2014-15 (Projected) 570 17 586 578 14% 81 FY 2015-16 (Projected) 586 16 602 594 14% 83
11.14 Taxes 11.14.1 MGVCL has projected Income Tax as per the actual for FY 2009-10. It is requested to the Honble Commission to pass on the impact of revised tax rates as per approved budget by the Central Government
Table 32: Tax Amount Projection FY 2011-12 to 2015-16
Rs in Crores Sr. No. 1 2 Particulars Normati ve ROE Provisi on for Tax / Tax Expenses FY 2011-12 (Projected) 71 6 FY 2012-13 (Projected) 74 6 FY 2013-14 (Projected) 78 6 FY 2014-15 (Projected) 81 6 FY 2015-16 (Projected) 83 6
11.15 Revenue Projections for Non-Tariff Income 11.15.1 The income in this category comprises of interest on loans & advances to employees / contractors, income from investments with Banks, Delayed Payment Surcharges from the Consumers etc. In the absence of any basis of projection, MGVCL has considered the Non-Tariff Income for second control period FY 2011-12 to 2015-16 same as actual figures of FY 2009-10.
Table 33: Non-Tariff Income projection FY 2011-12 to 2015-16
Rs in Crores Sr. No. 1 2 3 4 5 6 7 8 9 10 11 Particulars Interes t on Staff Loans and Advances Interes t from Ba nks, I nves tments and Consumers Delay Payment Charges from Consumers Income from Tra ding Ga in on sal e of Fixed Assets Penalti es received from Suppli ers APDRP incentives Miscel laneous Receipts. Excess provision of Bad Debts written ba ck Government Gra nt Write back/Cons umer Contribution Grant for Energy Cons erva tion Total Non-Tariff Income FY 2011-12 (Projected) 1 18 1 0 10 53 3 87 FY 2012-13 (Projected) 1 18 1 0 10 53 3 87 FY 2013-14 (Projected) 1 18 1 0 10 53 3 87 FY 2014-15 (Projected) 1 18 1 0 10 53 3 87 FY 2015-16 (Projected) 1 18 1 0 10 53 3 87
11.16 ARR for FY 2011-12 to 2015-16 under MYT second control period April 2011 Page 133
MGVCL
11.16.1 The Table below shows projection of Aggregate Revenue Requirement by MGVCL under MYT second control period FY 2011-12 to 2015-16.
Table 34: ARR Projection FY 2011-12 to 2015-16
FY 2011-12 (Projected) 3,047 269 222 40 39 7 0 15 (54) 121 51 40 6 3,533 71 6 3,610 87 3,523 FY 2012-13 (Projected) 3,594 284 234 42 41 8 0 16 (57) 134 44 47 6 4,109 74 6 4,189 87 4,102 FY 2013-14 (Projected) 4,084 301 248 45 43 8 0 17 (61) 147 35 53 7 4,626 78 6 4,709 87 4,623 FY 2014-15 (Projected) 4,468 318 262 47 46 9 0 18 (64) 159 24 57 7 5,033 81 6 5,120 87 5,033 Rs in Crores FY 2015-16 (Projected) 5,155 336 277 50 48 9 0 19 (68) 170 10 65 8 5,745 83 6 5,834 87 5,747
Sr. No. 1 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3 4 5 6 7 8 9 10 11 12
Particulars Cost of Power Purchase Operation & Maintena nce Expenses Employee Cos t Repa ir & Maintenance Administration & General Charges Other Debits Extra ordina ry Items Net Prior Period Expens es / (Income) Other Expenses Capitalised Deprecia tion Interest & Fina nce Cha rges Interest on Working Capital Provision for Bad Debts Sub-Total [1 to 6] Return on Equity Provision for Tax / Ta x Paid Total Expenditure (7 to 9) Less: Non-Tariff Income Aggregate Revenue Requirement (10 - 11)
April 2011
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BUSINESS PLAN FOR MYT SECOND CONTROL PERIOD FY 2011-12 TO 2015-16

Madhya Gujarat Vij Company Ltd. Vadodara, Gujarat

An ISO 9001:2008 Company

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Sales 1428 508 472 145 909 59 1877 358 5756

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

2005-06 5457 134199 2.46

2006-07 5612 151593 2.70

2007-08 6133 171815 2.80

2008-09 6678 225354 3.37

2009-10 7226 228712 3.17

Reliability Indices SAIFI SAIDI MAIFI

FY 2007-08 3.29 16 15.71

FY 2008-09 FY 2009-10 2.59 3.35 18.75 23.67 17.15 22.82

Particulars 2006-07 Transformer Failure Rate 9.60%

2007-08 2008-09 2009-10* 9.68% 6.11% 5.06%

Business Plan for MYT Control period FY 2011-12 to 2015-16

Revenue Realized Cost of Supply

2005-06 3.48 3.82

2006-07 3.79 4.10

2007-08 3.87 4.26

2008-09 4.57 4.83

2009-10 4.51 4.76

Business Plan for MYT Control period FY 2011-12 to 2015-16

FY 2009-10 50 117 18 7 59 251

Business Plan for MYT Control period FY 2011-12 to 2015-16

Regions North West South East N. East All India

% deficit 12% 14% 6% 4% 11% 10%

Peak Demand (MW) 37159 39609 32178 13220 1760 123926

% deficit 15% 18% 10% 6% 18% 13%

Source: CEA report on Monthly power supply position

Period 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Internal Origin Attributes of the Organisation

External Origin Attributes of the Environment

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Objective of the Business Plan

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16

Business Plan for MYT Control period FY 2011-12 to 2015-16