Presented by – R R Mehta

EA 2003 : Amendments & Way Forward

Confidential Slide

Flow Of Presentation

Improvement Areas

EA 2003 Amendments

Last 10 Years performance

2

EA 2003 Agenda

Reliance Energy- Overview

Confidential Slide

Overview – Mumbai Distribution

Data As on 31-Mar-14

Serving Mumbai Since 85 Years !!!

Distribution Area 400 Sq. km

No. of Customers ~2.9 Million

Max. System Demand 1,697 MVA

Distribution Loss ~9.4%

Reliability Index 99.97 %

Distribution Transformers 4,613 MVA

Power Transformers 3,042 MVA

HT Cable Length 4,137 Kms

LT Cable Length 5,892 Kms

3As on 31st Mar 2014

Confidential Slide

Our National Footprint

Distribution Assets in 3 States I Engaged with 7 States

IT Implementation AgencyChattisgarh & Bihar

-

IT Consultancy Karnataka

SCADA / DMS Consultancy - Haryana, Maharashtra - Chattisgarh. Bihar - Chandigarh

SCADA / DMS Consultancy

DistributionDistribution

Distribution

SCADA / DMS Consultancy

AMR Installation

ITCITIA

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Leading to a System Reliability of 99.97%

Network : SCADA & DMS

Country’s only Integrated (G-T-D) SCADA

State-of-the-Art Upgraded SCADA (SCADA security - ISO 27001)

Distribution Management System (11kV)(1st Utility in India - DMS S/S in 4 Digits - >1000)

Fully integrated with GIS-OMS

5OMS : Outage Management System; GIS : Geographical Info System

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Customer : Engagement

Proactive & Personalised communication for customer engagement

Website

- Personalized response

- ‘My-Account’ service

- E-bills to customers

- Online Chat

SMS services on :

- Scheduled outages

- Meter Reading

- All transactions

Information on Bill: -

Customized messages

- Conservation / Safety tips

- Regulatory Updates

Social Media

- FB : 1,00,000+ Fans

- Twitter : 19,000+ Followers

- You Tube :150+ Subscribers

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Unique home grown solutions being patented

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For prevention of theft in notorious theft-prone slum areas

Pilot implementation has led to loss reduction by 10%

Patented

Theft Proof Pillar

Innovations

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Patentapplied

Portable solution for accuracy checking of Energy meters

Innovations

Accu-check Easy-check

Compact and sturdy Dust proof and water proof Phantom load redesigned to reduce the weight (2 kg)

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Meter Data Acquisition & Management System- PrimeRead

MDA & MDM

AMI

AMREnergy Input

Utility

Meter Data Management

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Stepping stone for Smart Grid Applications

Confidential Slide 10

SAP Business Objects-Dashboard Features & Functionalities

•Operation Control•Trend Analysis•Triggers and Alerts

•System Data Integration• Display & Formatting• Adhoc Analysis

Visual Analytics & Interactive Dashboards :- Need of an Hour!!!

Dashboard

Confidential Slide

Flow Of Presentation

Improvement Areas

EA 2003 Amendments

Last 10 Years performance

11

EA 2003 Agenda

Reliance Energy- Overview

Confidential Slide

EA 2003 : Agenda

• Open Access & Franchisee• Competitive bidding• Power Trading

Competition

• Establishing SERC / APTEL• Unbundling

Accountability & Transparency

• Tariff Setting• State Govt Subsidy

Commercial Viability

• USO• Rural electrificationAccess

• Consumer Grievance• Reduction in T&D losses

Quality & affordability

• Mandatory RPOs• REC mechanism

Renewable Energy

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Confidential Slide

Flow Of Presentation

Improvement Areas

EA 2003 Amendments

Last 10 Years performance

13

EA 2003 Agenda

Reliance Energy- Overview

Confidential Slide

Slow Pace of Reforms

Avg implementation score across all states

is 0.54

Maharashtra, Delhi & Orissa are

forefront in implementing

reforms

Source : Deloitte 2013 14

Confidential Slide

Deterioration of Distribution finances

• Accumulated losses to the tune of Rs 2000 Bn • Sector losses = ~1.5% of GDP• Distribution sector contributes 80% of the above losses

Source : Khurana & Banerjee 2013, Referred in WB Report 2014

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Increasing Gap

• Cost – Revenue gap has doubled since 2003• Avg Cost rose about 7% a yr over 2003-11• Cost – Revenue gap grew about 6% a yr over 2003-11

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Source : Khurana & Banerjee 2013, Referred in WB Report 2014

Confidential Slide

Flow Of Presentation

Improvement Areas

EA 2003 Amendments

Last 10 Years performance

17

EA 2003 Agenda

Reliance Energy- Overview

Confidential Slide

Shunglu Committee

In Dec 2011, a High Level Panel headed by V.K Shunglu recommended

following key corrective actions:

• No write-offs, repayment period can be elongated

• State Govt not to be let-off the hook

• Suo-Motu tariff determination

• Cost reflective tariffs

• Increase in Power Purchase cost to be passed immediately

• SERC to act independently

• SERCs to be evaluated for their performance

• No mis-use of Sec 108 by State Govt

• Support to Discoms for T&D reduction

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Confidential Slide

Forward Path Franchisee or Privatisation Model would not deliver desired outcomes Well formulated PPP model in DISCOM is the way forward Wire & Supply Segregation is highly desirable

Concession Concessionaire required to obtain a license to comply with EA 2003 Concession period - 25 Yrs Ownership of Assets with Govt, Concessionaire exclusive rights to use No Govt shareholding except “Golden Share” for public policy matters Principles for determination of termination payment (after expiry of concession period) to

be specified upfront Tariff

Govt can provide existing subsidy to prevent tariff shock for initial years Supply tariff will include cost of electricity and a predetermined margin Pre-determined system of incentives / penalties based on the KPIs Trajectory of AT&C loss reduction to be part of bid, Over or Under performance to be borne

by Concessionaire

Chaturvedi Committee

In Nov 2010, task force under B K Chaturvedi was formed to develop a

framework for private participation in Distribution by way of PPP:

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ATE Directives

In Nov’11 ATE suo-motu issued the following directions :

• SERCs to ensure APR, true-up of past expenses, ARR & tariff

determination to be conducted year on year as per regulations

• SERC’s to decided the Tariffs before 1st Apr of the tariff year

• In case of delay, SERC can suo-motu proceed for tariff determination

• Regulatory Assets should not be created as a matter of course

• Recovery of RA should be time bound and within a period not

exceeding three years and preferably within control period

• Carrying cost of RA to be allowed to the utilities in ARR

• Fuel & Power Purchase cost adjustment should be done preferably

monthly but in no case exceeding a Quarter

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Confidential Slide

Lavasa Committee

In Oct 2012, Ashok Lavasa committee prepared the following FRP for

all loss making Discoms:

Financial Restructuring Plan:• 50% of the outstanding short term liabilities upto 31/03/12 to be serviced by

State Govt by issuance of bonds to participating lenders.• Balance 50% short term loans & payables for power purchase to be

rescheduled & serviced by the Discoms with a moratorium of 3 yrs & to be repaid in 5 yrs thereafter duly backed by a State Govt guarantee

• The State Govt will eliminate the gap between ACS & ARR within the period of moratorium of the bonds issued by the State Govt

Strategy for Discom turanround:• Regular Tariff Hike• Increase in Quantum of Power Sold• Rescheduling/ restructuring of existing loans• Continued short term lending by banks/financial institutions• Availability of surplus tradable power after a few years

FRP package would cost Rs 1.9 Trillion

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Confidential Slide

Flow Of Presentation

Improvement Areas

EA 2003 Amendments

Last 10 Years performance

22

EA 2003 Agenda

Reliance Energy- Overview

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Need s for EA 2003 Amendments

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• Creation of Regulatory Assets should not be allowed• Tariffs to be revised every yr, suo-moto determination by SERC

Sustainability

Accountability

Competition

Access

• SERCs to be more accountable• State Government to use sec 108 powers only in exceptional situations

• 24 X 7 supply in rural areas for all domestic purposes• Build proper infrastructure, financed by REC, considering 1 KW / house in rural

• Open Access encouraged• Wire & Retail Separation

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Needs of Administrative Changes:

• Existing expectations of EA2003 and Policies should be

implemented/enforced by Regulators

• EA 2003 should lay down framework for SERCs for uniformity in

implementation

• All SERCs should be aligned to such Framework through Model

documents prepared by FOR (Forum of Regulators)

Thank You

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Increasing State Subsidy

• Cumulative subsidies booked between 2003-11 : Rs 1.75 Tr• Cumulative subsidies recd between 2003-11 : Rs 1.30 Tr • Avg State support to power sector in 2011 : 1.3% of State GDP

Source : Khurana & Banerjee 2013, WB Report 2014 26

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Impact of Power Purchase Cost

• Share of Power Purchase Cost increased from 56% to 74% • Share of fuel cost on total Generation cost is ~80%• Increase mainly due to – extreme shortfall in coal, leading to use of imported coal and higher short term power purchases

56%

74%

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Source : Khurana & Banerjee 2013, Referred in WB Report 2014

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Cross Subsidy in tariffs

• Industrial Tariff is highest in 18 States• Commercial Tariff is highest in 11 States• Domestic Tariff is the lowest in all States - State Subsidy & Cross Subsidy

Source : WB Report 2014 28