Distribution Franchisee: Challenges in owning Legacy Network and Data for Business Viability and Transformation

SATISH KULKARNI CIO, ESSEL UTILITIES

AgendaEssel Group in Utilities

Distribution Franchise Current structure

Our Vision of the Business

Challenges : our experience

Our solution Roadmap

Q&A

Essel UtilitiesIntegrated utility company in India;

Acquired power and water distribution projects for major cities;

Essel Utilities is an enterprise of the Essel Group, Indias leading media and

entertainment conglomerate

Group turnover of $ 2.5 bn (FY 2011) ;

Market capitalization of over $ 5.2 bn of groups listed companies.

We envisage creating value

Top line revenue of $ 300 mn;

Over one million consumer base by FY 2013-14.

Project Areas

Power Distribution

Nagpur (Maharashtra);

Sagar (MP);

Ujjain (MP);

Gwalior (MP);

Muzaffarpur (Bihar).

Water Distribution

Aurangabad (Maharashtra).

Integrated Utility

Services

Power;

Water;

Gas;

Solid waste.

Shared

Infrastructure

Customer

Services;

Billing &

Collection;

IT Systems.

Value Added Services

Leveraging

Customer

Connect;

Value added services through other Business Integrations.

Leveraging Customer Connect Reduce Costs Improve Profitability

Distribution Franchisee Increased traction

Reduce Aggregate Technical &

Commercial Losses

DISCOMs key challenge

Public Private Partnership R-APDRP

Distribution

Franchisee

Initiatives by SEBs for efficient operations

Upcoming opportunities in Distribution FranchiseeMaharashtra : Ulhasnagar, Malegaon, Kalwa, Mumbra & Shil

Bihar : Gaya, Patna

Madhya Pradesh : Bhind, Datia, Satna, Guna, Dewas, Shahjpur, Narshinghpur, Indore, Bhopal, Jabalpur

Uttarakhand : Roorkee, Rudrapur, Haridwar, Dehradun

Uttar Pradesh : Bareily, Gorakhpur, Allahbad, Meerut, Varanasi, Aligarh, Ghaziabad

Jharkhand : Deoghar, Hazaribagh, Dhanbad

Haryana : Gurgaon, Panipath, Faridabad, Ballabgarh

Rajasthan : Kota, Bikaner, Bharatput, Udaipur

Others : Hubli (Karnataka); Hyderabad Old (Andhra Pradesh); Jammu (J&K)

Distribution Franchisees Awarded

A. Bhiwandi: Awarded to Torrent Power in 2006. Total

volume 2,400 MUs with losses of 58%

B. Nagpur: Awarded to Spanco Limited in 2010. Total

current volume at 1,300 MUs with losses of 30%.

Acquired by Essel Utilities in 2012

C. Aurangabad: Awarded to GTL in 2010. Total current

volume at 1,250 MUs with losses of 42%

D. Agra & Kanpur: Awarded to Torrent Power in 2010.

Total current volume at 4,650 MUs with losses of 45%

E. Jalgaon: Awarded to Crompton Greaves in 2011. Total

current volume at 667 MUs with losses of 30%

F. Gwalior, Sagar and Ujjain: Essel Group has been

awarded. Losses at ~40% - 45%

G. Jamsedhpur: Awarded to Tata Power in 2012.

H. Ranchi: Awarded to CESC in 2012

I. . Muzaffarpur Awarded to Essel,

J. Bhagalpur Awarded to SPML

Several States expected to accelerate privatization of distribution entities providing credible base for

long term portfolio growth

Key drivers of returnsLoss

Reduction

Execution

Economies of Scale

Growth

Reduction in AT&C loss achieved directly adds to the bottom line

Capex optimization and technological improvements

Centralisation of key processes to realize low incremental operating costs

Ability to procure power at relatively competitive rates from 3rd party vendors

Linked to growth in per capita consumption as well as number of consumers

Competitive advantage in bidding for other utilities in the same city or in other cities of same state

Process re-engineering to minimize leakages and achieve synergistic system integration

IT deployment and automation of key processes leads to improved efficiencies

Power Sector Policy & Reforms

Electricity Act 2003

National Electricity

Policy - 2005

National Tariff

Policy - 2006

Liberal power development framework

Competitive Environment

Private Investment

Multiple licensing of distribution

Stringent theft control

Trading distinct activity permitted with licensing

Accessibility to power

Spinning Reserves

Quality Power

Per capita electricity from 612 to 1000 by 2012

Commercial viability

Restructuring of distribution utilities

Adequate financing support to utility

Transparency and Accountability

Private sector participation to reduce losses

Competitive Procurement & Transmission of Power

Efficient operations

Promote Multi Year Tariff framework

Loss reduction

Progressive reduction of Cross Subsidy

State & Joint Electricity

Regulatory Commission

Central Electricity Regulatory

Commission

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Our Approach

Asset Survey

Asset Survey

Asset Condition

Assessment

Network Analysis

Commercial Due Diligence

Consumer Profiling

Commercial Losses

Profiling

Collection Baskets

Customer Connect

Consumer Need

Assessment

Community Leadership

connect

Public Relationship

Initiatives

Customer Need Analysis

Working on improving consumer connect

Call Center, Customer

Service Centers

Collection Efficiency

Network Improvement

Immediate O&M Needs

Reduced FOC/NPC

Circle Control

Loss Reduction

Network Securitization

AB Cable / Metering

Focus on Enhanced Vigilance

Periodic Inspections

Pre Takeover

Challenges Customer Database Database is legacy in nature

Documentation on the legacy system is scarcely available

No structured mechanism of information sharing in DFA

Integration Issues with utility system

Support for the business process changes needed at ground zero level

Learn by experience fact of the day

Asset Database Asset Survey provides limited visibility

As build details are not available

Most of the Assets not supported by AMC /Warranties

No reliable maintenance history records

R-APDRP Agreements : DF agreements issues

Widescale IT deployment to improve data collection and system integration

Implementation of process level automation to improve efficacy and overall system reliability

Automation initiatives:

AMR Automated Meter Reading

Bill printing and bill delivery

Streamline collection strategy

GIS based Consumer indexing & bucketing

Dunning policy based collection Periodic rule based interventions such as SMS, Outbound calling for payment reminders

Enhancing consumer experience

centralized 24x7 call centers

FTR First Trial Response policy

Queue management system to streamline complaint assessment and provide hassle free service

Plugging apparent holes in implementation and access to first level loss reduction hooking, collection, meters, aged infrastructure

On-site assessment of hooking and power theft cases

Implementing Arial Bunch Cabling as permanent solution to hooking

Meter infrastructure enhancement (electro-mechanical to digital) and replacement

Proactive vigilance to prevent recurrence of thefts

Shift from Old Conventional Utility based structure to Integrated Smart Utility structure

Centralization of common services to achieve cost sustainability

Incorporation of best-practices through Outsourcing

Establishing economies of scale with ability to integrate other utilities into system through development of plug-and-play structure

R&D center establishment to focus on continual technology up-gradation

Create platform for achieving economies of

scale through development of plug-and-

play smart utility model

IT deployment and process re-

engineering

Immediate loss reduction

Essels execution strategy

Stage - I

Stage - II

Stage - III

U Input Costs Control T&D Loss Reduction Collection Efficiency

Exponential Business Growth Business Sustenance

OPEX Control Optimize Asset Usage Project Management

Multi Services Utility Business B2B Integration with Group

Commercial

Operational

Growth

Cross Business

Utility Business Drivers : IT Plan

IntegratedUtility

Critical Business Factors for DF IT ArchitectureMulti State , Multi Service Operations

State wise Regulatory Regime

Statutory rules different

Operational need differ viz Holiday , Reporting, Tariffs, O&M Needs as per demography

Quick Role out , parallel implementation tracks

Shared Corporate Services Finance ,HR, Procurement, IT

B2B Service Integration

Single Business View through Analytics

Manageability, Flexibility , User Adoption

ALIGNEDTO

BUSINESS

INDUSTRYSTANDARDS

BEST OF

BREEDSTRICT

SECURITYPOLICY

RAPID BUTSTAGGED

DEPLOYMENT

BESTINDUSTRY

TALENT

SUSTAINANCE

ITSTRATEGY

Our IT strategy is mainly driven to compliment the dynamic business needs and sustenance

Our IT Strategy

LEGACY BILLING

QUICK FIX CRM

EXISTING AMR

CUSTOMER METERS

DT METERS

QUICK FIX CUST. SERVICEAPP.

AMR PHASE-1

NETWORK STUDY

BILLING

CUSTOMER CARE

METERING IMPROVEMENTS

METER DATA MANAGEMENT

AMR PHASE-1/2

GIS

SMART METERING

ASSETMANAGEMENT

PORTAL

AMR PHASE-2

GIS

GROUP METERING

ENTERPRISEINTEGRATION

SCADA

ERP

AMR PHASE-2

GIS

DEMAND MANAGEMENT

FIELD AUTOMATION

B2B INTEGRATION

BUSINESSSUSTAINANCE

PROCESS BLUEPRINTBUSINESS

ANALYTICS

Quick Fix Business Essential Enterprise Analytics

Application Implementation Roadmap

Metering Service Provider (MSP)- Concept

Concept Similar to Deregulated Market

Single Window Metering Responsibility a

Metering OPEX Model

Utilize Vendors Expertise

Rapid Control over Commercial Losses

Leverage AMI/AMR to reduce O&M cost over large area by getting outages information

Technology Risk Management

Efficient Utilization of the Meter Information

Leased

Supply

Installation

Operations

Maintenance

MSP will be a Single Window Metering Responsibility Center for DF

Meter Services Provider (MSP)- Responsibilities

All types of Meters and AMR on RF Mesh

Related Equipment

Meter Testing Equipment

Meter Inventory Storage

Maintain Adequate Stock for Meters and other Equipment

Supply Lease

Participate in Installation Planning/ Targets / SLA Setting

Meet Mass Meter Installations Targets as per SLA

Provide MIS and SLA Reports

Take Corrective Actions

Installation

Setup an Metering Operation Center (MOC)

Meter Read Schedules, Ensure Daily Meter Reads Success

Receive Meter Related Complaints

Analyze Reading Issues, Faulty Meters , Mobilize Maintenance Crew

Inventory Management, SLAs, MIS and Dashboards

Operation

Maintenance Crews Mobilization

Receive Maintenance Work Orders

Attend Metering Work Orders as per SLAs

Address all Field Related Issues

Maintenance

Zero Commercial Loss Framework Forum of Electricity Regulator report on loss reduction strategy

Recommendation Third party verification of energy audit results for different areas/localities

could be used to impose area/locality specific surcharge for greater AT&C loss levels and this in turn could generate local consensus for effective action for better governance

Commercial loss surcharge equivalent to losses of group of consumers is recoverable

Maharashtra Case StudyMERC vide Tariff order in JAN 2002

Introduced a process for Loss Charge on the consumers

Based on average realization from consumer category

Intention is to create awareness in consumers

Intention is to differentiate between circles based on loss levels

In Jan 2003 , charges exempted for 11 circles where losses are below target loss level

T&D Loss charges concept has brought in some awareness

The charge withdrawn from 2003

Maharashtra Case Study : LearningLoss Charge is viable and can be incorporated by regulatory order

Loss Charge can be leveraged for the losses which are grater than the losses factored in the tariff

Need to establish Energy Accounting in smaller consumer group

Transparent Mechanism for Result Verification

Visibility created at group level enables better control

Effort need to be sustained by use of appropriate technology

Group Metering project ROI can be through loss charge mechanism

Metering InitiativesSystem Metering

0.5 Class Meters for Feeders & DTRs

Interval data recording for all key parameters

Communicable Meters

Use for Asset Operational Analysis

Group Metering Metering for group of consumers

20 to 25 Consumers in a group

Communicable Meters with Active & Reactive Energy recording capability

Detection of abnormal usage pattern

Social Responsibility ModelSocial Network Portal which will provide

Transparency regarding AT&C Losses calculations

Loss Surcharge Calculations

Can be viewed by all stake holders Regulators

Consumers

DISCOM

Serves as platform to bring in reduction of AT&C loss through local consensus for effective action & better governance

Q&A