Rules of Stakeholders in Distribution Reforms

you have learnt about the issues and challenges facing the power distribution sector. You know that, in the distribution sector, the T & D losses have remained high, billing and collection efficiencies are poor, the physical infrastructure has remained overloaded and weak, and new investments have not been forthcoming to the extent anticipated. Apart from rampant theft, the distribution sector is beset with poor billing (only 55%) and collection (only 41%) efficiency.

These challenges could be met only through comprehensive reforms in the distribution sector. In Unit 2, you have studied about the roles of the Central and State Governments set forth in the Electricity Act, 2003, the National Electricity Policy and the National Tariff Policy. You have studied that the main features of the distribution reforms ushered in by these Acts and Policies are:

• setting up of CERC and SERCs for rationalization of tariff;

•corporatisation of SEBs;

•100% feeder metering;

•100% consumer metering;•

•energy accounting and auditing at all levels to promote accountability and reduce T & D losses;

•securitisation of outstanding dues of CPSUs; and government support to SEBs/Utilities.

However, these steps have not been sufficient to transform the StateElectricity Boards into commercially viable industrial ventures The process of reforms in the power sector has yet to attain the desired results. The initiatives on tariff rationalization and removal of subsidies have resulted in tariff increases without any improvement in quality, reliability and availability of power supply. This, in turn has led to increased consumer resistance. Apart from this, investments, particularly from the private sector,could not be sustained in the sector for a variety of reasons. The situation calls for concerted action by all stakeholders on problems affecting electricity distribution, particularly, those concerning the customer-utility interface.

Some Stakeholders in the Reforms Process

What role can the various parties involved in the reforms process play in improving the situation and accelerating the power distribution reforms process? This is what we discuss now.

Role of the Central and the State Governments

The Central and the State Governments have to perform a very positive and facilitating role in bringing about reforms in the sector as per the new directions of the Electricity Act, 2003. This Act provides a legal framework for ushering distribution reforms like enabling local institutions to manage distribution, third party sale, reduction in cross-subsidies, penal provision for thefts, etc. Under the provisions of the Act, the Central Government has formulated the National Electricity Policy and National Tariff Policy for the development of the power system based on optimal utilization of resources. It has to notify a National Policy for rural areas permitting stand-alone systems based on renewable and non-conventional energy sources in consultation with States (Section 4 of the Electricity Act, 2003). It has also to formulate a National Policy in consultation with the concerned State Governments for bulk
purchase of power and management of local distribution through Users’Associations, Cooperatives, Franchisees and Panchayati Raj Institutions, etc.. The Rural Electrification  

The Central Government recognised the need for rapid improvement in the distribution sector and committed itself to supplement the efforts of the state utilities. It launched the Accelerated Power Development Reform Programme (APDRP) to provide financial assistance to utilities in the distribution sector as well as incentives to encourage improved financial performance of the utilities.

The Structure of Electricity Industry Prior to the Electricity Act, 2003

Further, to achieve commercial viability in the state owned Power Sector,the Central Government has formulated a six level intervention strategy that encompasses initiatives at the national level, state level, SEB/utility level,distribution circle level, feeder level and the consumer level. It may be interesting to also compare the structure of the electricity industry prior to the

Electricity Act, 2003 with the evolving structure in the reforms era

In the reforms era, the Central Government has also taken many other measures such as

• setting standards and specifications for equipment and technologies;

• evolving standard operating procedures for project formulation, execution,monitoring and evaluation;

• capacity building in states, SEBs and utilities; and

• initiating R&D programmes for upgrading technology, remote metering and efficient equipments based on the recommendations of the Technical Committees in the power sector and financial sector.

MoAs have been signed with the State Governments to set up SERCs,restructure SEBs, reduce cross-subsidies and tariff anomalies. Budgetary support has been given to SEBs towards subsidies. Privatization is being encouraged. The following additional support from the Central Government is expected to run the system smoothly in terms of improving power availability:

supply of additional power where feasible;

increased assistance for distribution system through APDRP;

funding for 100% rural electrification;

speedier implementation of the Rajiv Gandhi Grameen Vidyutikaran Yojana;

strengthening and improvement of the transmission network by POWERGRID; and concessional financing by Power Finance Corporation.

Augmentation of the transmission and distribution networks is necessary along with funds for carrying out the above-mentioned activities.

The Evolving Structure of the Electricity Industry

The State Governments have to implement the legislative measures and other measures stipulated in the Acts and Policies. States have constituted SERCs which have already issued tariff orders. The SERCs would work towards rationalization of electricity tariffs in a phased manner. In addition,states have the following functions:

reorganisation of State Electricity Boards; (Twelve states have already reorganised their SEBs.) metering of all 11 kV feeders and of all consumers;

energy audit at all levels;

100% electrification of villages and hamlets;

budgetary allocation for Electricity Subsidy and its Disbursement;

creation of Special Courts for speedy disposal of theft cases; and enactment of anti-theft legislation.

The States can involve local bodies, panchayats and cooperatives, User’s Associations, franchisees, etc. in discharging some of these functions for better management of power distribution.

Role of SEBs/Utilities

The SEBs are being restructured under the reforms process to provide for

• increased accountability;

• introduction of commercial accounting; and

• setting up of online management information systems for decision making covering technical, commercial, and management functions.
Twelve states have unbundled/corporatised their respective SEBs. Delhi and Orissa have privatized distribution. The utilities are required to take techno-commercial steps at the Distribution Circle level for reducing outages,improving reliability and reducing technical and commercial losses. In the scheme of the reforms, each circle is visualised as an independent profit centre. Capacity building, network and load data survey, collection and validation, preparation of circle-wise Detailed Project Reports, project
formulation and execution is being done at this level.

At the 11 kV feeder level, the feeders are visualised to be operated as business units that will be accountable for quality of power and reliability,metering, billing and collection. IT applications covering remote metering at feeder and distribution transformer levels will be the mainstay for monitoring and collection. Replacement of conductors and energy efficient distribution transformers, metering of feeders and distribution transformers, reducing HT/LT ratio, segregation of technical and commercial losses, etc. are being
done. Further, load research and demand side management measures are expected at these levels.

In the course of implementing the APDRP, it has been observed that utilities have undertaken innovative programmes to reduce aggregate technical andcommercial losses, improve metering, billing and collection, improve load management, IT intervention, implement SCADA and distribution automation.

The power distribution utilities around the world have begun to embark on radical reforms in electricity distribution business with a view to increase efficiency, reduce per unit power supply cost and enhance customer service and satisfaction. It is important that utilities share their experiences and adopt the best practices for improvement of the distribution sector and for achieving maximum benefits of the investments made in the distribution sector.

The following steps could be adopted by the utilities to discharge their roles satisfactorily.All utilities should adopt turnkey mode of execution of projects under APDRP for the ensuing projects. Outsourcing of meter billing and collection could be undertaken. A few utilities have outsourced the meter billing and collection part of the billing process to local bodies and they have been successful in increasing revenue collection.

Operation and maintenance activities have also been outsourced by some of the distribution companies, who have been able to improve the maintenance of the equipment. The mode of “outsourcing” could be decided by the employees and the management jointly.IT initiatives in the distribution sector are one of the key areas of intervention. Supervisory Control and Data Acquisition System (SCADA),one of the options, is required to be necessarily implemented in the distribution sector for better demand side management of the course BEE-002) and other activities. Remote metering may also be beneficial for implementation, as it will obviate many hurdles of the traditional type of metering.

Distribution management in rural areas could be facilitated by adopting,to the extent possible, the High Voltage Distribution System (HVDS),which is the latest innovation in providing power supply to rural sector/industrial sector. Utilities that have adopted this system have been able to reduce their losses substantially. Uniform equipment standards need to be adopted and the guidelines for technical specifications issued from time to time by ERCs and the CEA have to be followed. Benchmarking of performance will not only improve the performance of individual utility but also pave the way for comparison amongst the utilities. Utilities should evaluate their performance against certain benchmarks and strive hard for progressive improvement. Market liberalization and setting up of independent regulators has created a greater need to define the quality, reliability, cost of the power and services
being provided by the distribution utilities. Therefore, time has come for the distribution utilities to keep pace with the market requirements for their survival. This needs setting up of benchmarks in all spheres of its operation such as technical, commercial, financial, human resources, research, etc.Setting up of benchmarks and creating new ones after surpassing them is basically a continuous drive for improving quality of business and services to customers.

Customer care and satisfaction is an important dimension of the role of the utility, which has suffered through all these years. It is a fact there are customers who consume electricity but are reluctant to pay. It is also a fact that there are customers who are willing to pay and do pay, but they do not receive the right attention and service from the suppliers of electricity. Utilities must concentrate on the facilities to be provided which result in 100% customer satisfaction. Some of the facilities are web based billing and round the clock opening of customer care centres. Computerization of billing and revenue process, prompt redressal of complaints through computer based tracking, establishment of computer based trouble-call management system, bringing transparency in dealing with the cases, etc. are some of the measures that utilities can take for improving customer satisfaction. All utilities must provide consumer indexing and computerized mapping system so that customer supply can be monitored and energy audit is also carried out to cut down the losses.

The electricity industry has so far been supplying power to customers under the culture that organizations are not “marketing power” but giving power.Giving new connections, solving the problem of electricity disruptions or taking care of issues related to bills, etc. are some issues that need to be taken care of promptly by every utility. Tariff hikes have to be very judiciously planned so that there is less resistance from the consumer and the prices are gradually rationalized.The utility has to act very responsibly towards the customer and its needs.

This problem is not limited to SEBs. Even the private licensees have not given the required attention to this subject. Though it must be mentioned that the care for customers by and large in their case is much better, there is considerable scope for improvement. The real issues pertain to improving the reliability of power supply for which shortages need to be tackled, system network and other infrastructure need to be strengthened, good work culture has to be established, and theft of electricity has to be curbed and penalized.

Utilities need to understand that the satisfaction level of a consumer plays a very important role in the entire process of revenue realization. What is the situation today? On the one hand, the quality of supply is getting deteriorated and on the other hand, the rates of electricity are going up. The consumer is not willing to accept this situation any more.What do the consumers expect from a utility today? A consumer of any product or service has basically three rights:

• reasonable quality and price of goods or service;

• adequate and correct information of product or service; and

• in case of dispute, ‘Fair interpretation of the law’.Based on this, any consumer of electricity Distribution Company expects

uninterrupted power (reliability and quality) at appropriate tariff (commercial billing, metering and recovery) with human face (attitude and approach of utility staff).

The world over, distribution utilities are striving hard to excel in these areas to earn ‘consumer affection’, which is much beyond satisfaction. With the reforms in ‘power sector’ and the Electricity Act, 2003, in place, the consumers in India are hopefully looking towards the newly created distribution companies to address their woes and give them a sigh of relief. The consumers also have an important role to play in the reforms process.
 
Role of Consumers

In the reforms process, mandatory metering for all consumers is being implemented. Consumers should implement this measure. Public awareness campaigns for compliance of billing and prevention of theft, use of energy efficient equipment and appliances have been carried out to involve the consumers in the reform process. Consumers need to be educated and made aware of the realities of the power sector economics and the revenue cycle so as to ensure better compliance and thereby reducing the resistance. They also need to be encouraged to take part in public hearings of SERCs and also give suggestions on their draft regulations. This will help them in discharging their responsibilities for metering, bill payments, energy conservation, etc. in an effective way.

Though tariff fixation has been depoliticised to the extent that the Government no longer has a role in it, political pressures still exist. It is hoped that the problem is of the transition period. The Regulatory Commissions have established consumer service benchmarks, which utilities have to follow.The consumers should be aware of these developments to be able to demand good quality and reliable electricity from the Utility.