Day-3, Mr. Ramesh Narayan BYPL Ippai issues in distribution

1. Issues in Distribution & Open Access
Aug 3rd , 2013
14th Regulators & Policymakers Retreat 2013
Day 3, Session 7
Ramesh Narayanan
Chief Executive Officer
[BSES Yamuna Power Ltd.]

2. Contents
 Demand Supply Mismatch
 12th Five Year plan
Targets
Envisages..
 Power Distribution
 Vs Generation / Transmission
 Cost of Distribution
 Challenges
 An approach for Reforms
 Models for distribution turnaround
2 BSES Yamuna Power Ltd.

3. DEMAND SUPPLY MISMATCH
3 BSES Yamuna Power Ltd.

4. 4
 Installed Capacity : 2,25,133 MW
 Grid Demand : 1,32,811 MW
PROBLEM : Power Demand Constraints
HUGE Suppressed & Unaddressed Demand
 Suppressed Demand in the form of
 Huge pileup of the New connection pendency (other than private utilities)
 45% of the 2 Crs pumpset run on DG Sets (4% un-electrified)
 Unavailability of efficient Public transport system : Metro, Monorail etc.
 Majority of the un-electrified railway corridors (other than main trunk lines)
As on May’13
Upto May13
*Source: www.cea.nic.in

5. Economic Development
5
 Installed Capacity : 2,25,133 MW
Grid Demand : 1,32,811 MW
India Vs China (demand growth in last 21 years)
 Installed Capacity : 950,000 MW
 Grid Demand : 7,40,000 MW
YEAR 1991 YEAR 1991
YEAR 2012 YEAR 2013
 Installed Capacity : 1,50,000 MW
 Grid Demand : 1,25,000 MW
 Installed Capacity : 66,000 MW
 Grid Demand : 57,000 MW
CHINA INDIA
* Data Source : www.wikipedia.org & other web reports
5 Times
growth
2.5 Times
growth
BSES Yamuna Power Ltd.

6. 12TH FIVE YEAR PLAN
6 BSES Yamuna Power Ltd.

7. TARGETS [ 2012-2017 ]
7
Generation
Sector
8th
Plan
9th
Plan
10th
Plan
11th
Plan
12th
Plan*
Central 50% 24% 57% 34% 30%
State 42% 50% 30% 34% 17%
Private 8% 26% 13% 32% 53%
Transmission
 1,07,440 CKm of X’mission Lines 42 %
 2,70,000 MVA of Transformation Capacity 68 %
 12,750 MW of HVDS system 130 %
Distribution
 Additional distribution demand : 1,84,800 MW
2.1 times the generation capacity @ 2.1 Crs / MW
Over 3,50,000 Crs of Investment
Over 3,00,000 Crs of Investment
Over Rs 3,88,600 Crs of Investment
~88,536* MW addition
*Source : Planning Commission
* Excluding RE of 30K MW)
BSES Yamuna Power Ltd.
Of existing
capacity

8. 8
Envisages….
1) Debt Restructuring Policy as per 12th Plan’s Expert Group’s recommendation
Short Term Liability (STL) restructuring backed by state govt guarantee:
o 50% conversion through bonds
o 50% rescheduled by lenders serviced by discoms
o Restructuring to be accompanied by concrete and measurable
o Action to improve operational performance
o Private discoms eligible ??
2) Restructured APDRP
 Relaxation of population norms
 R-APDRP assistance to private discoms
 National Electricity Fund (NEF) for interest relief
 Adoption of Multi-Year Tariff framework, timely tariff revisions
 Open Access for consumers with load > 0.25 MW
 Energy Efficiency & Demand Side
BSES Yamuna Power Ltd.

9. 9
Envisages….
3) Promoting Private Investment & Participation in Distribution
 Expansion of Franchise / PPP / Privatization
4) Separation of Rural Feeders / Universal Electrification
• Clearing RGGVY backlogs states
• Restructuring of RGGVY for rural n/w strengthening
6) Human Resource Development and Capacity Building
• Additional workforce requirement of 4Lac
7) R&D in Power Sector
• Smart Grid / SCADA / Distributed Generation / Rural Electrification
8) Management of Energy Demand and Energy Efficiency
• National Clean Energy Fund : RE sources & smart grid development
• Demand Side Mgmt (urban, rural & agricultural sector)
BSES Yamuna Power Ltd.
FUNDS
IDENTIFIED ?

10. Distribution
10 BSES Yamuna Power Ltd.

11. Vs Generation / Transmission
Parameter Generation Transmission Distribution
Cost reflective Tariffs
with timely revisions
Tax Holidays ;
Excise / Import Duties waivers
Project Financing
Based on
PPAs
Based on
BPAs
Based on
Balance Sheets
Transparency of cost/expenditure
in tariff petition
Reduce Disparity Across the Power Chain
11 BSES Yamuna Power Ltd.

12. 12
 Power Purchase (80% of total cost)
• Generation cost
• Transmission cost
• LDC cost
 O&M Cost includes
• Repairs & Maintenance cost
• Employees cost
• Administrative cost
 Financial Cost includes
• Depreciation
• Interest , Tax
• RoE
UNCONTROLLABLE
Cost of Distribution
75% is attributed to Gencos
running on “Cost Plus” basis
Controllable
Controllable

13. Fund Flow… (Existing & to be explored)
13
Bill
Discounting
Lease
Financing
Pension
Funds
Project
Financing

14. Distribution Challenges
14
Policy IssuesAccumulated Losses
Generation Cost Inadequate Tariff
1 2
3 4

15. Generation Costs
15 BSES Yamuna Power Ltd.
• Cost Plus tariff - adding financial burden on the Discoms
• Minimal checks & balances for Performance Audits
• Tariff fixation CERC in isolation.
• Project based financing
Exiting
Benefits
• “Competitive Route” mandate for fully depreciated plants
• Nodal Agency for transparent Performance Audits
• Tariff fixation be in close coordination between CERC &
stakeholder SERCs
• Balancing - The Companies Act, 1956 & The Electricity Act, 2003
Way
Forward

16. Inadequate Tariff
• Significant rise - Bulk Power Purchase Cost
• Stagnant distribution tariffs - Vote Bank Politics
• Gap : Avg. cost of supply & avg. realization
Reason
• De-politcization of Electricity tariff
• Build National consensus towards cost reflective tariff
• Immediate pass through of Bulk Power cost
Way
Forward
16 BSES Yamuna Power Ltd.

17. Accumulated Losses
• Discoms under huge debts & severely cash constrained
• Huge accumulation of Regulatory Assets
• Difficulty in raising funds – OPEX, CAPEX
Huge
Accumulated
Losses
• FRP package to be implemented expeditiously
• Why Private Discoms be deprived of FRP benefits ?
• Time bound liquidation of Regulatory asset
Way
Forward
17 BSES Yamuna Power Ltd.
( Short Term Debt ~Rs. 2 Lac Cr )

18. Health of Utilities – FY 12
Financial Loss - Trend
Aggregate Loss + Subsidy Estimated at Rs 1.2 lac Cr ( ~ 1.5 % of GDP)
Input Energy
Sector Snapshot
Cost of Supply
( Rs.6.3/ unit )
Energy Collected
Revenue
( Rs.4.2 / unit )
GAP
( Rs.2.1 / unit )
Rs.3.6 lac Cr
770 BU
580 BU
Rs.2.4 lac Cr
Rs.1.2 lac Cr
32
54
64
96
120
29
34 34 34
27
21
19
14
-10
10
30
50
70
90
110
130
FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12
Rs.'000Cr.
Subsidy
Numbers are based on FY12 are estimates
Deteriorating Health of Utilities
18 BSES Yamuna Power Ltd.

19. Policy Issues
• Fixed RoE (14%)
• Margin pressure
• Balance sheet based funding
Fund
Raising
• Common Distribution Infrastructure Fund
• Funds to be made available at attractive rates
• Project Based Funding
• Inclusion of private players – RAPDRP etc
Way
Forward
19 BSES Yamuna Power Ltd.

20. An Approach for Reform
20

21. Distribution : Supporting Framework
ADMINISTRATIVE FRAMEWORK
 All statutory support to the discoms for schemes like RAPDRP etc
 State government assistance for facilitating discoms network infrastructure
REGULATORY FRAMEWORK
 Realistic approach towards Discom
 Time bound discom cost amortization
 Cost reflective tariffs & support schemes
FINANCIAL FRAMEWORK
 Concept of SPV / JV/ Project based Financing
 Assured Return on Equity
 Low cost debt instruments for overall sectoral growth
 Incentives in terms of tax holiday, duties & taxes
OBJECTIVE : Provide much needed Impetus to the DISTRIBUTION
LEGAL FRAMEWORK
 Endorsement of the Electricity Act -2003
 Theft / misuse of electricity
 Mitigation of regulatory challenges
 Discom standards of performance
21 BSES Yamuna Power Ltd.

22. Transparency
“Tariff structure breakdown”
Commercialization
“Cost to Serve ”
Fund Addition
“ Financial Restructuring Plan ”
Balanced Development
“Integrated Resource Planning”
Strategy- Accelerated Development
22 BSES Yamuna Power Ltd.

23. Proposal 1 Incentivize the efficient DISCOM
Prerequisite for the DISCOM
1. Unbundling
2. Privatization
3. Compliance of Electricity Act 2003
4. Loss Reduction
5. 24 x 7 uninterrupted electricity supply
6. 100 % electronic meter
7. Improved customer satisfaction
8. Zero pendency in new connection
9. Setting up special courts/ consumer forum
10. Total Electrification
Incentivize discoms by :
 Cheaper Power Allocation
 Reduced X’mission cost burden
 Tax holidays
 Customer
- Reduction in Tariff
 Government
- Compliance of The Electricity Act 2003
 Distribution Sector
- Turn into lucrative sector
 DISCOMs
- Improved financial health
Benefits
23 BSES Yamuna Power Ltd.

24.  Indulge itself with HIGH OUTSTANDING DISCOMS (Non payment of loan)
 Discoms to grant LICENSE for certain cities to JV for loss reduction & reform
The EXISTING DEBT to be converted to EQUITY portion for that licensee
 JV to bring in technical & business efficiencies for those cities
Proven Distribution
Utility
DFI & NBFC JV
Proposal 2 Lender-Discom Partnership (LDP) Model
24 BSES Yamuna Power Ltd.

25. Proposal 3 Wire – Content Model
25
WIRE Business (EPC)
 Centralized Monitoring (Inline with generation addition)
 Centralized empanelment for EPC contractor (for discom network creation)
 New n/w created to be leased to the state discom by the Central agency.
 State Discom to pay Fixed Cost / Lease rental to the centralized agency
CONTENT Business (State Discom)
 Power procurement / management
 Operations & Maintenance of the WIRE business
Much needed impetus to the Network Creation

26. 26
Proposal 4 Green Power for Govt / PSUs
“Unique Model “ & a precedence for promoting RPO acceptability cross the nation
 Renewable power sourcing as per RPO @ higher tariffs
 This power to be channeled to govt / PSU offices at suitable tariffs
Advantage :
 Government i) Another step towards Demand Side Management
ii) Partnering discoms Clean & Green power adoption
 Customer iii) Reduced financial burden thereby lesser tariff hike
BSES Yamuna Power Ltd.

27. THANK YOU
www.bsesdelhi.com
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