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

Issues in Distribution & Open Access

Aug 3rd , 2013

14th Regulators & Policymakers Retreat 2013

Day 3, Session 7

Ramesh NarayananChief Executive Officer [BSES Yamuna Power Ltd.]

Contents

Demand Supply Mismatch

12th Five Year plan TargetsEnvisages..

Power Distribution Vs Generation / Transmission Cost of Distribution Challenges An approach for Reforms Models for distribution turnaround

2 BSES Yamuna Power Ltd.

DEMAND SUPPLY MISMATCH


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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 59 % Utilization

*Source: www.cea.nic.in

Economic Development

5


Grid Demand : 1,32,811

MW

India Vs China (demand growth in last 21 years)

Installed Capacity : 950,000 MW


MW

YEAR 1991 YEAR 1991

YEAR 2012 YEAR 2013



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.

http://www.wikipedia.org/

12TH FIVE YEAR PLAN


TARGETS [ 2012-2017 ]

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GenerationSector 8th

Plan9th 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

~Rs 10,40,000 Crs

*Source : Planning Commission

* Excluding RE of 30K MW)


Of existing capacity

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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


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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)


FUNDSIDENTIFIED ?

Distribution


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 Chain11 BSES Yamuna Power Ltd.

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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

Fund Flow… (Existing & to be explored)

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Bill Discounting

Lease Financing

Pension Funds

Land Bank Mortgage (Commercialization)

Project Financing

Equity

Capitalization

Debt

Capitalization

Distribution Challenges

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Policy IssuesAccumulated Losses

Generation Cost

Inadequate Tariff

1 2

3 4

Generation Costs


• 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

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


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


( Short Term Debt ~Rs. 2 Lac Cr )

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

5464

96

120

2934 34 34

2721

1914

-10

10

30

50

70

90

110

130

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12

Rs. '

000

Cr.

Burden

on G

ovt.

Subsidy

Numbers are based on FY12 are estimates

Deteriorating Health of Utilities


Policy Issues

• Fixed RoE (14%)• Margin pressure• Balance sheet based funding

FundRaising

• Common Distribution Infrastructure Fund• Funds to be made available at attractive rates• Project Based Funding • Inclusion of private players – RAPDRP etc

Way Forward


An Approach for Reform

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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


Transparency “Tariff structure breakdown”

Commercialization“Cost to Serve ”

Fund Addition“ Financial Restructuring Plan

”

Balanced Development“Integrated Resource

Planning”

Strategy- Accelerated Development


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


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


Proposal 3 Wire – Content Model

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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

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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


THANK YOUwww.bsesdelhi.com

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

Technology

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