National discom?
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Govt wants to set up a central PSU that competes with the private sector for State discom contracts, incl installing smart meters, making connections, substations, underground cabling, repair & maintenance and various other services.
CPSU will support states to implement the Centre's "power for all" initiative and develop capabilities by aggregating work from many state discoms. Under "power for all" initiative, citizens will get assured 24X7 power, sensible tariffs and good services -- whilst state discoms will collect most or all of the dues.
Success of UDAY
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70% reduction in distribution losses (to Rs 17,400cr), 5% point reduction of aggregate losses (or AT&C losses) and narrowing of per-unit loss by 57% (to Rs 0.24/kWh loss), all point to the success of UDAY scheme.
More needs to be done (to collect dues, reduce line losses and instil operational efficiency) but UDAY has improved the financial health of state discoms, allowing them to undertake new work to further strengthen the distribution arm.
Electricity consumption has also accelerated (triggering a rise in short-term clearance prices on electricity exchange), even before 'Saubhagya' household electrification has swung into full mode.
Govt wants to set up a central PSU that competes with the private sector for State discom contracts, incl installing smart meters, making connections, substations, underground cabling, repair & maintenance and various other services.
CPSU will support states to implement the Centre's "power for all" initiative and develop capabilities by aggregating work from many state discoms. Under "power for all" initiative, citizens will get assured 24X7 power, sensible tariffs and good services -- whilst state discoms will collect most or all of the dues.
Success of UDAY
70% reduction in distribution losses (to Rs 17,400cr), 5% point reduction of aggregate losses (or AT&C losses) and narrowing of per-unit loss by 57% (to Rs 0.24/kWh loss), all point to the success of UDAY scheme.
More needs to be done (to collect dues, reduce line losses and instil operational efficiency) but UDAY has improved the financial health of state discoms, allowing them to undertake new work to further strengthen the distribution arm.
Electricity consumption has also accelerated (triggering a rise in short-term clearance prices on electricity exchange), even before 'Saubhagya' household electrification has swung into full mode.
3
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- An important part of UDAY was to fix operational improvements in accountability for the states. As per the provisional March 2018 data available on the UDAY portal, several states have indeed shown tremendous improvement on the urgent items.
https://www.uday.gov.in/home.php
Financial improvement-----------------------------
About 86 per cent of the total bond issue needed to transfer the high-cost DISCOM debt to lower cost state government debt has been completed. 25 out of 27 states have set in some level of tariff revisions to accurately reflect their cost of operations in their customer interfacing businesses.
Operational tasks of central govt----------------------------------------
The central government has also progressed. A full rural feeder audit has been undertaken to understand where the billing gaps are. Sixty-three per cent feeder segregation between urban and rural feeders is completed, which will eventually help more efficient power transmission and make it possible to use different power generation sources for different usage requirements.
The distribution transformer metering (DT metering) is progressing too – 59 per cent of the urban and 52 per cent of the rural work is completed. DT metering is crucial to understand where power theft occurs in the electricity distribution network and helps in better energy accounting and power supply reliability.
Operational efficiency indicators--------------------------------
Three key indicators point to multi-pronged operational efficiency improvements:
1. Accumulated losses are down 70 per cent to about 1.73 lakh crore in 2017-18 because of two factors. Firstly, as the DISCOM debt was moved to state government books, the cost of debt servicing for DISCOMs has significantly reduced. Secondly, due to the reduction in the unitised gap between the average cost of supply (ACS) and average revenue realisation (ARR), the pace of making new losses have reduced.
2. AT&C losses, often a euphemism for power theft reflecting poor power infrastructure, DISCOM governance, and state police are now at 18.74 per cent. This figure was almost 24 per cent when UDAY was launched. Best points improvement came from Manipur (12.5% points), J&K (7 %), Assam (7%), Rajasthan (6.5%) and Bihar (6%).
Five states – Uttarakhand, Tripura, Punjab, Madhya Pradesh and Mizoram – saw AT&C losses increase. MP, which was worsened by 4.8 points ascribes this spike to the increased rural power supply in rain-deficient regions.
In relative terms, the largest falls in AT&C losses were in Bihar. It fell 33% from previous periods, or down 6% points. Uttar Pradesh (28 per cent, down 2.2% points), Haryana (20 per cent, down 5%), and Rajasthan (just under 20 per cent, down 6%) also showed significant movement on curbing power theft and making consumers accountable for paying for their power usage. There’s still work to be done to reach the maximum 15 per cent AT&C mark set for DISCOMs under UDAY.
3. Tariff cost gap (difference between ACS and ARR) reduced at the fastest pace ever in 2017-18. After the UDAY launch, the gap has narrowed by 3 per cent (2015-16), 18 per cent (2016-17) and 48 per cent (2017-18). The last year improvement comes on the back of tariff hikes by most DISCOMs. Better metering and revenue realisation have also helped reduce this gap.
Improved payments to creditors-------------------------------------
All these improvements also reflect on how DISCOMs deal with power generation players. On average, the account receivables for power generation firms fell by 8 per cent between the financial years 2016-17 to 2017-18, while the number of days these receivables stand outstanding reduced by 13 per cent. This improvement demonstrates that DISCOMs, who buy power from these generation players are paying them more regularly and faster.
Promoting continuous improvement-------------------------------
1. Smart meters
Central government firm Energy Efficiency Services Limited is working to procure almost 250 million smart meters and help DISCOMs install them for their large customers. Billing efficiency and potential time of day billing structures can help both DISCOMs and the end customers. Smart metering was also a key aspect of UDAY design, but the progress on this front has been slower compared to other areas. So far, less than 1 per cent of the target for smart metering has been achieved, but the pace should pick up in the current financial year.
2. Unable to pass on inefficiencies beyond 15% AT&C
The current Power Minister R K Singh has suggested that power tariff determination should account only for 15 per cent AT&C losses after March 2019. This means that inefficient DISCOMs will have to work really hard to hit 15 per cent. Cost of losses over 15 per cent will not be allowed to be passed on to the customers and will directly hit the DISCOM books. This measure is expected to nudge DISCOMs into taking a hard look at their operations.
3. DBT: Recognise cost of State giveaways ASAP
Currently, states promise cheap per unit power to the consumers and then delay the subsidies to the DISCOMs, which get paid by the end customers at a lower rate. If DBT is used, the state governments will have to pay the consumers directly, who will then pay a fraction of the transferred amount to DISCOMs. This measure will ensure that political parties do not make unreasonable promises to the citizens, and later avoid paying subsidy differentials to the discoms.
4. Recognise discom losses on State books ASAP
UDAY has made states accountable financially and operationally. State governments can not camouflage financial losses of discoms as they can no longer borrow for losses from off-balance sheet entities.
All these measures will still only bring DISCOMs to a capability level, where they can keep their lights on and strike a balance between their utility role and running a consumer business. The elephant in the room is to ensure round-the-clock, round-the-year power availability to all consumers – residential, industrial and agricultural – in a reliable and affordable manner.
Future measure to improve efficiency---------------------------
1. Investment in distribution infrastructure
DISCOMs have hardly any money to invest in maintaining, let alone completely renovating the power equipment which makes the last-mile supply possible. Currently, the UDAY induced improvements are guiding DISCOMs towards bare minimum operating profitability. Their capacity to invest afresh and invest big is still and will remain poor, even with the full UDAY benefits kicking in.
2. Privatisation of discoms
Large-scale privatisation of DISCOMs across states is a non-starter given the experience of 15 years. But states can outsource more of the work. DISCOMs' health can be helped by the idea of "national DISCOM". A follow-up article will explain how a national DISCOM can transfer the power generation, transmission and distribution improvements made by this government to the end customer.
REPLY 30w - Cont./
National Discom: Imperfect, But A Potential Catalyst For Ensuring 24x7 Household Power
As India transitions from peak summer heat to initial monsoon months, a constant problem large part of urban India has to deal with is power supply failures. Announced and unannounced power cuts accompany every heat wave, the first shower, and strong gusts of monsoon winds across the country with uncanny predictability.
India boasts of an installed power base of over 343 gigawatts. Indian power generation capacity is much higher than the current demand, residential, commercial, and agriculture put together. And yet, the residential customers seldom enjoy 24x7 power supply.
This strange contradiction is frequently a matter of raucous media and social media debates. The buck stops at what the last mile power supply companies – usually the state electricity distribution companies or discoms – can or cannot do. These discoms have a history of financial and operational blunders, which have been compounded by reckless subsidy-politics. The Ujwal Discom Assurance Yojana (UDAY) programme has helped these discoms stutter back to sanity and common business sense over the last three years.
Yet, if urban India has to see 24x7 power supply, two things need to be done.
Firstly, the electricity transmission capacity and better matching of generation and consumption geographies have to be done. The Narendra Modi government has already done a lot of work on this count. India’s transmission capacity measured in circuit kilometres is up 25 per cent since this government took over. This is an area of ongoing improvement and will eventually cease to be a bottleneck.
Secondly, the discoms need to ensure several things. The infrastructure starting from local substations to a consumer’s home is all maintained by the discom. Substations, local power lines, transformers, and electricity metres are discom properties. And this is where the major blame lies. This infrastructure is creaky and frequently blows up at the first sign of adverse weather. There’s also the usual apathy, bureaucratic delays and corruption at the state level, which mars a critical consumer-facing operation.
World over, consumer-facing companies are racing to use the power of technology to bring better customer experience. Indian state discoms, however, remain stuck to their old moorings. Barring some states like Andhra Pradesh, Gujarat and Maharashtra, most discoms have to cover a big distance to frontier. This is where a national discom comes in.
The Economic Times reported earlier this month that the Union Power Ministry was indeed considering such an idea. The idea itself is not new. Veteran journalist Shankkar Aiyar had written about such a set-up as early as February 2015. What can a national discom achieve?
Currently, every state discom performs the same functions, several of which are routine and can easily be “mutualised”. These similar functions are discharged at significantly varying levels of maturity by each discom. Each state discom has widely varying cost structure with widely varying competence to perform the same function. A national discom can operate a common platform to ensure all states gain from economies of scale and specialisation of services.
Pooling of power purchase agreements (PPAs) and negotiating good, stable power supply rates at a large scale is the most obvious benefit. The PPA linkages can also be rationalised on a geographic basis. The most optimal supply and demand picture can be created, improving the usage and throughput of the transmission facilities.
The use of renewable power can be promoted too. Currently, states float individual tenders, which are not always at a large scale. A national view can change that and provide better purchase visibility to renewable generation businesses.
Such a national discom can also run technology platforms for all state discoms to use. Such a platform can be used for mundane things like customer billing or for more advanced areas like using data analytics for better operational management. A national operation can also help provide consumer touch points like call centres, app-based service with local operations leveraging a common technology backbone.
A clear demarcation of the responsibilities between central and state governments through such a national discom can then lead to achieving the longstanding goal of separating content from carriage. Separating the function of carrying power from one point to another, and finally engaging the customer are fundamentally two different skills. Former is a utility function – every discom need not invest in the carriage. The latter is a customer experience function and the customer should have a choice of providers, which is currently not the case. Except for the industrial open access units, all other customers deal with a monopoly state or private discom.
A national discom would be a true utility. It can own all carriage functions nationally. The discom or discoms, once multiple supply licences are allowed in every circle or state, would simply buy power from the transmission utility and supply to its end customers at the last possible point. The discom would then focus on the customer, bringing value-added services, deploying more technology like smart meters, creating new structures like pre-paid coupon based power supply, new pricing choices like time of day usage, encouraging net metering and solving the real local challenges.
The separation of content and carriage was first envisaged in the landmark Electricity Act of 2003. But it is a political hot potato, even without a national discom in the picture. State discoms and their employees will likely oppose this idea tooth and nail – their monopoly position is their bargaining chip.
Structurally, a national discom can attract wider investment for improving power infrastructure. Some of these investments are already made by the central government through schemes like the Integrated Power Development Scheme (IPDS). But the efficiency of implementation of Central programmes at the state level is never guaranteed.
A national discom can undertake large scale projects, attracting investments from agencies like the National Investment and Infrastructure Fund (NIIF) or multilateral bodies like the Asian Infrastructure Investment Bank (AIIB). Targeted investments can be made by the national discom to overhaul the city power infrastructure, again leveraging economies of scale in sourcing and procurement.
State electricity boards are also a big source of corruption. Employees of these boards are known to establish small equipment manufacturing units and then win bloated contracts for simple items like transformers and cables. A national discom will procure at a scale, formalise the power equipment manufacturing industry further, and reduce corruption by reducing the points of sourcing.
But a national discom is not an easy proposition. The opposition, which has already accused the Narendra Modi government of shortchanging them on issues like equitable distribution of tax revenue sharing, will likely oppose the idea. The good news is that the ruling Bharatiya Janata Party (BJP) dispensation can still push the idea across a large number of states it governs.
When the UDAY programme was launched in November 2015, then power minister Piyush Goyal had worked individually with each state to sign them up. A similar approach may be required here to make national discom acceptable. A key lever to push the idea is the part conversion of state discom workforce to the central workforce. The central government pay scales, as well as general benefits, are better than what most states offer.
The biggest benefit of a national discom may, however, come at the long end of steady-state operations – privatisation of the state discoms. Barring Rajasthan under Chief Minister Vasundhara Raje and Odisha under Chief Minister Naveen Patnaik, no other state has got any meaningful private participation going in the distribution sector. Even Uttar Pradesh, which has a super-majority BJP government and a strong Chief Minister in Yogi Adityanath, had to scrap the plans to involve private players in the function.
But once a national discom has operated for a few years, with the state discom significantly right-shifted in the value chain and with limited hyper-local functions, it may become easier for the states to bring private participation.
Outright power distribution privatisation with full separation of content and carriage and market pricing to incentivise the private players to invest in infrastructure would be really ideal. But the really ideal concepts seldom work in the supercharged and binary judgmental world of Indian politics.
Power Minister R K Singh has a unique opportunity to establish a national discom – a less than ideal solution – but likely a great multiplying force to the UDAY-led ongoing discom reform. If UDAY represents a combination of antibiotics and vitamin dose, a national discom, if implemented well, can well be a mild steroid.
REPLY 37w - Smart meters can benefit consumers and discoms
India is rapidly working towards realising its vision of affordable and accessible 24×7 power. Already the third-largest conventional energy producer, India is building the world’s largest solar plants to achieve 175 GW of solar capacity by 2022. While the power sector has witnessed an unprecedented turn-around in generation, its weakest link is distribution. Poor equipment maintenance, and high power theft, are responsible for aggregate technical and commercial (AT&C) losses of approximately 25%, amongst the world’s highest. Currently, India curtails renewable-energy generation to prevent grid ‘overloading’, causing renewable-energy developers losses, and affecting
equipment efficiency.
The government’s UDAY (Ujwal Discom Assurance Yojana) scheme endeavours to provide some reprieve to India’s DISCOMs, and distribution sector, through financial restructuring. With their capability to cut transmission and distribution losses, and ensure 24X7 power, smart meters have also been made a part of this scheme, which can
unlock a cascade of benefits for discoms and consumers.
Smart meters will enable discoms to forecast energy demand cycles in real-time, and swiftly rebalance the grid’s energy sources, achieving renewable-energy infusion. With smart meters recording and anticipating fluctuations throughout the day, discoms can explore ‘Time of Use (ToU) tariffs’ that accurately reflect energy prices. While discoms
can shift loads from high-price hours to low-price hours, consumers can also save on electricity bills by opting for more attractive ToU tariffs. Globally, low-cost timings are used for storage applications, such as EV charging. The two-way communication technology underpinning them will enable utilities to facilitate demand response and prediction, and management of peak demand, achieving grid stability. With real-time
communication between DISCOMs and consumers, smart meter data can ensure faster outage detection and restoration of services, and end billing inefficiency via an automated bill meter reading. Additional consumer benefits include access to a prepaid billing model wherein they pay only for the electricity they can afford. They can also
consciously adopt energy efficient practices, managing energy costs better.
With these benefits, the smart meter is a vital technology in India’s power reform, creating the potential to reduce DISCOMs’ current liability to India’s financial infrastructure, estimated to be Rs 20,000 crore. With the replacement of 25 crore conventional meters with smart meters, billing efficiency can improve from 80 percent to 100 percent, and they have the potential to increase DISCOM revenues by Rs 1.1 lakh
crore.
Based on technology availability and requirements, a variety of technologies can underpin two-way communication with discoms. The simplest of these is low-energy radio frequency (RF) waves, deployed almost a decade ago in the West. There is also the
General Packet Radio Service (GPRS), used by most mobile communications today.
Making smart metering even smarter are cellular communication options, which unshackle DISCOMs from designing, installing, operating, and maintaining a private network. Cellular technology also gives smart meters inter-operability, coverage, and capacity. This translates to smart meter software that can be updated over the air, much like smartphone apps. Globally, utility providers using smart meters are transitioning to 4G LTE connectivity, which can facilitate innovative solutions in metering.
Smart meters are the first step in the digitisation of energy, paving the way for India’s smart energy revolution. Powered by cutting-edge technologies like the Internet of Things (IoT), and automation, ‘smart energy’ integrates energy consumption with renewable-energy production, relevant infrastructures, through energy services, active
users, and enabling technologies. Noteworthy applications include net metering, through which residential solar panels can contribute to consumer energy needs, and reduce their bills, and battery storage, which can help find viable uses for renewable energy.
Understanding these benefits, the government’s Smart Meter National Programme is working to implement one of the world’s fastest ramp-up of smart meter installation, targeting the retrofitting of 25 crore meters.
Along with universal and affordable energy access, there is a larger imperative to smart meters as well. As the conduit for the end-to-end transfer of energy demand, smart meters are the building blocks of smart grids. Globally, smart grid infrastructure investment in countries like China and the US has risen from approximately $67 billion in 2009 to nearly $200 billion in 2015 – creating a corresponding demand for smart meters. The mandatory nature of these meters in a country with the size and population of India can create bulk demand and facilitate economies of scale in reducing manufacturing costs.
Smart meters, thus, not only act as a pathway to resolve DISCOM woes with newfound efficiencies but can also create an entire domestic smart meter industry where none previously existed.
The benefits of smart meters are clearly profound—and most importantly, easily accessible for consumers, for whom it is a simple one-time installation of a compact appliance. What they get in return is an unparalleled degree of transparency and trust in their DISCOMs, and reliable electricity supply.
REPLY 37w
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