submitted by uttar gujarat vij company ltd. … plan fy 2011-12 to fy...submitted by uttar gujarat...

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Business Plan for UGVCL for

the Control Period FY12-FY16

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April 2011 Page I

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY ............................................................................................................................. 1

2. INTRODUCTION ..................................................................................................................................... 19

2.1 BACKGROUND ......................................................................................................................................... 19 2.2 BUSINESS ACTIVITIES ................................................................................................................................ 20 2.3 OBJECTIVE OF BUSINESS PLAN .................................................................................................................... 21 2.4 APPROACH TO BUSINESS PLAN.................................................................................................................... 22

3. UGVCL PROFILE ..................................................................................................................................... 25

3.1 BACKGROUND ......................................................................................................................................... 25 3.2 VISION AND MISSION OF UGVCL ................................................................................................................ 25 3.3 OPERATING STRUCTURE OF UGVCL ............................................................................................................ 27 3.4 OVERVIEW OF UGVCL .............................................................................................................................. 28 3.5 CATEGORY WISE NO. OF CONSUMERS ........................................................................................................... 29 3.6 IT INITIATIVES .......................................................................................................................................... 29 3.7 HUMAN RESOURCE MANAGEMENT ............................................................................................................. 30 3.8 CORPORATE SOCIAL RESPONSIBILITY ............................................................................................................ 36 3.9 CONSERVATION OF ENERGY........................................................................................................................ 37 3.10 ACTIVITIES RELATED TO CONSUMER SERVICE ................................................................................................. 38 3.11 MAJOR ACHIEVEMENTS OF UGVCL ............................................................................................................. 38

4. OPERATIONAL PERFORMANCE ANALYSIS .............................................................................................. 40

4.1 BACKGROUND ......................................................................................................................................... 40 4.2 DEMAND SUPPLY SITUATION IN UGVCL ....................................................................................................... 40 4.3 SALE OF POWER ....................................................................................................................................... 41 4.4 DISTRIBUTION LOSSES ............................................................................................................................... 44 4.5 CONSUMER BASE ..................................................................................................................................... 46 4.6 OPERATING INDICES ................................................................................................................................. 46 4.7 POWER PURCHASE ................................................................................................................................... 47 4.8 TRANSFORMER FAILURE RATE ..................................................................................................................... 47 4.9 EMPLOYEE RATIONALISATION ..................................................................................................................... 48 4.10 SUPPORT FROM GOG ............................................................................................................................... 49 4.11 REVENUE REALIZED FROM SALE OF POWER VS AVERAGE COST OF SUPPLY ........................................................... 49 4.12 DEMAND SIDE MANAGEMENT INITIATIVES BY UGVCL .................................................................................... 50

5. FINANCIAL PERFORMANCE .................................................................................................................... 58

5.1 REVENUE STATEMENT ANALYSIS ................................................................................................................. 58 5.2 BALANCE SHEET ANALYSIS ......................................................................................................................... 63 5.3 RATIO ANALYSIS....................................................................................................................................... 66 5.4 ANALYSIS OF CAPITAL EXPENDITURE ............................................................................................................ 68

6. POWER SECTOR OVERVIEW ................................................................................................................... 70

6.1 BACKGROUND ......................................................................................................................................... 70



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6.2 ALL INDIA INSTALLED CAPACITY ................................................................................................................... 70 6.3 ACTUAL POWER SUPPLY POSITION IN INDIA ................................................................................................... 72 6.4 POWER SECTOR IN GUJARAT ...................................................................................................................... 73 6.5 INSTALLED CAPACITY AVAILABLE TO GUJARAT ................................................................................................ 73 6.6 POWER SUPPLY POSITION OF GUJARAT FROM CEA ......................................................................................... 74 6.7 ALLOCATED CAPACITY TO UGVCL (AS ON 1/10/10) ..................................................................................... 75 6.8 PROMOTION OF SOLAR ENERGY .................................................................................................................. 76 6.9 POWER PURCHASE FOR UGVCL .................................................................................................................. 76

7. REGULATORY FRAMEWORK .................................................................................................................. 78

7.1 BACKGROUND ......................................................................................................................................... 78 7.2 SALIENT FEATURES OF ELECTRICITY ACT, 03 .................................................................................................. 79 7.3 NATIONAL ELECTRICITY POLICY, 2005.......................................................................................................... 84 7.4 NATIONAL ELECTRICITY PLAN...................................................................................................................... 86 7.5 TARIFF POLICY ......................................................................................................................................... 94 7.6 TARIFF BASED COMPETITIVE BIDDING .......................................................................................................... 95 7.7 RURAL ELECTRIFICATION POLICY, 2006 ........................................................................................................ 96 7.8 R-APDRP (RESTRUCTURED ACCELERATED POWER DEVELOPMENT & REFORM PROGRAM) .................................... 96 7.9 RENEWABLE SOURCES ............................................................................................................................... 97 7.10 RENEWABLE ENERGY CERTIFICATE MECHANISM ............................................................................................. 98 7.11 NATIONAL ACTION PLAN FOR CLIMATE CHANGE (NAPCC) .............................................................................. 99 7.12 STATE MARKET REGULATIONS .................................................................................................................. 101 7.13 CURRENT GERC REGULATIONS SUMMARY .................................................................................................. 104 7.14 KEY PROVISIONS .................................................................................................................................... 108

8. MARKET ISSUES AND CHALLENGES ...................................................................................................... 109

8.1 OPEN ACCESS ........................................................................................................................................ 109 8.2 PARALLEL LICENSE .................................................................................................................................. 110 8.3 REGULATORY PROVISIONS:....................................................................................................................... 110 8.4 INDUSTRY RISK AND COMPETITION: ........................................................................................................... 110 8.5 RENEWABLE PURCHASE OBLIGATION (RPO) ............................................................................................... 111 8.6 IMPACT OF DSM REGULATIONS ................................................................................................................ 113 8.7 INTRA-STATE ABT IMPLEMENTATION – UI IMPLICATION ................................................................................ 115 8.8 UNIVERSAL SERVICE OBLIGATION .............................................................................................................. 116 8.9 POWER PURCHASE RESPONSIBILITY ........................................................................................................... 116 8.10 MARKET PENETRATION AND SERVICE AREA .................................................................................................. 116 8.11 COST TO SERVE AGAINST AVERAGE REALIZATION ........................................................................................... 117 8.12 RATIONALIZATION OF TARIFFS TO RETAIN HT & LARGE CONSUMERS ................................................................. 118 8.13 STANDARDS OF PERFORMANCE (SOP’S) ..................................................................................................... 119 8.14 OPERATING NORMS – REGULATED BY SERC ................................................................................................ 119 8.15 FUTURE MARKET OPERATIONS AND FINANCIAL POSITIONS ............................................................................. 120

9. SWOT ANALYSIS .................................................................................................................................. 121

9.1 BACKGROUND ....................................................................................................................................... 121 9.2 STRENGTHS ........................................................................................................................................... 121 9.3 WEAKNESSES ........................................................................................................................................ 122



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9.4 OPPORTUNITIES ..................................................................................................................................... 124 9.5 THREATS .............................................................................................................................................. 126 9.6 SUMMARY OF SWOT ............................................................................................................................. 128

10. RISK ANALYSIS ................................................................................................................................. 129

10.1 BACKGROUND ....................................................................................................................................... 129 10.2 RISK ASSESSMENT AND THEIR MITIGATION PLANS ......................................................................................... 129

11. FUTURE BUSINESS OPPORTUNITIES ................................................................................................ 138

11.1 PUBLIC PRIVATE PARTNERSHIP .................................................................................................................. 139 11.2 ANCILLARY SERVICES ............................................................................................................................... 140 11.3 PROFESSIONAL METER TESTING FACILITY .................................................................................................... 140 11.4 NON CONVENTIONAL ENERGY .................................................................................................................. 140 11.5 DISTRIBUTION FRANCHISEE ROUTE ............................................................................................................ 141 11.6 FUTURE PLANS IN OTHER AREAS ............................................................................................................... 141

12. OPERATIONAL PLAN ........................................................................................................................ 143

12.1 SALES PROJECTIONS ................................................................................................................................ 143 12.2 DISTRIBUTION LOSS ................................................................................................................................ 145 12.3 ENERGY BALANCE .................................................................................................................................. 145 12.4 BULK SUPPLY TARIFF & POWER PROCUREMENT PLAN (MYT PERIOD).............................................................. 145 12.5 POWER PURCHASE COST ......................................................................................................................... 147 12.6 OPERATION AND MAINTENANCE COST ....................................................................................................... 148 12.7 CAPITAL EXPENDITURE (CAPEX) PLAN ....................................................................................................... 149 12.8 DEPRECIATION ....................................................................................................................................... 150 12.9 INTEREST & FINANCE CHARGES ................................................................................................................. 151 12.10 INTEREST ON WORKING CAPITAL .......................................................................................................... 151 12.11 RETURN ON EQUITY ........................................................................................................................... 152 12.12 NON TARIFF INCOME .......................................................................................................................... 152 12.13 PROVISION FOR BAD DEBT ................................................................................................................... 153 12.14 TAXES .............................................................................................................................................. 153 12.15 AGGREGATE REVENUE REQUIREMENT .................................................................................................... 154



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LIST OF FIGURES Figure 1: Area map of UGVCL ................................................................................................................ 28Figure 2: Category wise number of consumers 2009-10 ...................................................................... 29Figure 3: Administrative Structure of UGVCL ....................................................................................... 31Figure 4: Organisation Structure of UGVCL .......................................................................................... 32Figure 5: Demand Supply Situation in UGVL ......................................................................................... 41Figure 6: Category wise Sale of Power (MUs) ....................................................................................... 42Figure 7: Category Wise Sales (%) ......................................................................................................... 43Figure 8: Trend in Distribution Losses ................................................................................................... 44Figure 9: Consumer Base ...................................................................................................................... 46Figure 10: Employee Expense/Units Sold (Rs /Unit Sold) ..................................................................... 49Figure 11: Revenue Realised Vs Cost of Supply (Rs / Unit) ................................................................... 50Figure 12: All Indian Installed Capacity – 31st March 2010 (GW) ........................................................ 70Figure 13: Fuel wise Installed Capacity in India .................................................................................... 71Figure 14: Peak and Energy Deficit in India .......................................................................................... 72Figure 15: Region wise Peak and Energy Deficit ................................................................................... 72Figure 16: Installed Capacity in Gujarat as on 31.03.2010 (MW) ......................................................... 74Figure 17: State wise Average Cost of Service Vs Realization ............................................................. 117



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LIST OF TABLES

Table 1: Sales Growth Rate ................................................................................................................... 41Table 2: Reliability Indices of UGVCL .................................................................................................... 46Table 3: Power Purchase Expenses for the past 5 Years ...................................................................... 47Table 4: Transformer Failure Rate ........................................................................................................ 48Table 5: Details of Employees ............................................................................................................... 48Table 6: Agriculture Subsidy for the Last 5 Years .................................................................................. 49Table 7: Achievement of DSM Scheme ................................................................................................. 53Table 8: Details of installation of Amorphous Transformers Scheme .................................................. 55Table 9: Status of Amorphous Transformers upto August 2010. ......................................................... 55Table 10: Result of Feeder Bifurcation Work ........................................................................................ 56Table 11: Details of Feeder Bifurcation work ....................................................................................... 57Table 12: Details of Load Balancing Transformer ................................................................................. 57Table 13: Profit & Loss Account for Last 5 Years .................................................................................. 58Table 14: Balance Sheet of last five years ............................................................................................. 63Table 15: Ratio analysis for last 5 years ................................................................................................ 66Table 16:Scheme-wise details of Capital Expenditure .......................................................................... 68Table 17: Actual power Supply Position as on 31.03.2010 from CEA ................................................... 74Table 18 : Allocated Capacity to UGVCL as on 01.10.2010 ................................................................... 75Table 19: List of SERC Regulations for Distribution Licensee .............................................................. 101Table 20: UGVCL’s Cost of Service and Average Realisation .............................................................. 119Table 21: The CAGR for Sales Growth ................................................................................................. 143Table 22: Growth rate considered for Projections ............................................................................. 143Table 23: Additional Sales for Agriculture Metered Category ............................................................ 144Table 24: Category wise Sales Projections .......................................................................................... 144Table 25: Distribution Loss Trajectory ................................................................................................ 145Table 26: Energy balance for the FY12 to FY16 .................................................................................. 145Table 27: Power Availability Plan from Existing Plants ....................................................................... 146Table 28: Power Availability from New Plants .................................................................................... 147Table 29: Power Purchase Cost ........................................................................................................... 148Table 30: Operation and Maintenance Cost ....................................................................................... 148Table 31: CAPEX plan for UGVCL ......................................................................................................... 149Table 32: Funding of CAPEX ................................................................................................................ 150Table 33: Depreciation during the FY12 to FY16 ................................................................................ 150Table 34: The Interest and Financial Charges ..................................................................................... 151Table 35: Interest on Working Capital ................................................................................................ 152Table 36: Return on Equity ................................................................................................................. 152Table 37: Non Tariff Income ............................................................................................................... 153



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Table 38: Provision for Bad Debt ........................................................................................................ 153Table 39: Taxes during the FY12-FY16 ................................................................................................ 153Table 40: Aggregate Revenue requirement for FY12-FY16 ................................................................ 154



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LIST OF ABBREVIATIONS

Sr. No Abbreviations Descriptions

1. ABT Availability Based Tariff

2. ALDC Area Load Dispatch Centre

3. AMR Automatic Meter Reading

4. ARR Aggregate Revenue Requirement

5. BPL Below Poverty Line

6. CAGR Compound Annual Growth Rate

7. CDM Clean Development Mechanism

8. CERC Central Electricity Regulatory Commission

9. CFL Compact Fluorescent Lamp

10. CGS Central Generating Station

11. CoS Cost of Supply/ Service

12. CPPs Captive Power Plants

13. DDG Decentralised Distributed Generation

14. DGVCL Dakshin Gujarat Vij Company Limited

15. Discoms Distribution Companies

16. DSM Demand Side Management

17. DTC Distribution Transformer

18. EA/The Act The Electricity Act 2003

19. ERP Enterprise Resource Planning

20. FOR Forum of Regulators

21. FY Financial Year

22. GEB Erstwhile Gujarat Electricity Board

23. GERC Gujarat Electricity Regulatory Commission

24. GETCO Gujarat Energy Transmission Corporation Limited

25. GETRI Gujarat Energy Training & Research Institute

26. GIS Gas Insulated Substations

27. GoG Government of Gujarat

28. GoI Government of India

29. GSECL Gujarat State Electricity Corporation Limited

30. GUVNL Gujarat Urja Vikas Nigam Limited

31. HP Horse Power

32. HT High Tension

33. IPP Independent Power Producers

34. KV Kilo Volt

35. kVA Kilo Volt Ampere

36. kVAh Kilo Volt Ampere Hour

37. kWh Kilo Watt Hour



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Sr. No Abbreviations Descriptions

38. LT Low Tension

39. LTA Leave Travel Allowance

40. MGVCL Madhya Gujarat Vij Company Limited

41. MOD Merit Order Despatch

42. MoP Ministry of Power

43. MOU Memorandum of Understanding

44. MU Million Units (Million kWh)

45. MW Mega Watt

46. MYT Multi Year Tariff

47. NAPCC National Action Plan of Climate Change

48. NPC Nuclear Power Corporation

49. NEP National Electricity Policy

50. NTP National Tariff Policy

51. NTPC National Thermal Power Corporation

52. O&M Operation & Maintenance

53. PF Provident Fund

54. PGVCL Paschim Gujarat Vij Company Limited

55. PPPA Power Purchase Price Adjustment

56. R-APDRP Restructured Accelerated Power Development & Reform Programme

57. REC Renewable Energy Certificate

58. RGGVY Rajiv Gandhi Grameen Vidyutikaran Yojana

59. RMU Ring Main Unit

60. ROE Return on Equity

61. RPO Renewable Purchase Obligation

62. SCADA Supervisory Control and Data Acquisition

63. SEZ Special Economic Zone

64. SLDC State Load Dispatch Centre

65. SWOT Strength, Weakness, Opportunity and Threats

66. T&C GERC (Terms & Conditions of Tariff) Regulation, 2005

67. T&D Transmission and Distribution

68. TASP Tribal Area Sub Plan Scheme

69. UGVCL Uttar Gujarat Vij Company Limited

70. UI Charges Unscheduled Interchange Charges

71. UMPP Ultra Mega Power Plant

72. UNCCC United Nations Framework Convention on Climate Change

73. WEG Wind Energy Generator



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April 2011 Page 1

1. Executive Summary

• UGVCL is company registered under the Companies Act 1956, with the objectives of distribution of electricity in the northern parts of the State of Gujarat. The Commission is in the process of formulation of revised Multi Year Tariff Regulations for the Control Period from FY 2011-12 to FY 2015-16, and as part of that process has directed UGVCL to submit a Business Plan which would cover the Strategic and Operational Plan for the Company.

• UGVCL has prepared the Business Plan taking cognisance of the existing internal factors and external business environment affecting the business. It is submitted that the Business plan being a dynamic document may need to be updated at periodic intervals taking into account the changes in the internal and external environment and these changes would be intimated to the Hon’ble Commission from time to time.

A. Background

• The Business Plan is initiated based on a review of “what is” on the Company’s current operations, operational performance and organisation structure. The formulation of strategies is driven by the consideration of the vision, mission and values that the Company holds and cherishes. The existing profile of the Company, its strengths and weaknesses, its policies, and the emerging legal and business environment plays an important role in the formulation of the plan.

• The approach and methodology adopted for preparation of Business plan of UGVCL is as follows. The business plan is prepared for the projection period FY 2012 to FY 2016. The assumptions like investment plan, load forecast, loss reduction plan, power

procurement plan etc. are maintained as provided in MYT petition for second control period FY 2011-12 to 2015-16

B. Objective of Business Plan

• As per the Forum of Regulators recommendation “Distribution licensees should submit the business plan and power purchase plan, for approval of the Commission, at least six months prior to submission of MYT petitions”. Also as directed by the Hon'ble commission Business Plan for the second Control Period is to be filed along with the MYT filings for the second Control Period. UGVCL has developed a comprehensive business plan for the company for the period FY 2011-12 to FY 2015-



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16. The business plan in following sections intends to cover the above issues from the strategic, competitive, financial, commercial and organisational perspectives.

C. Company Profile

• Uttar Gujarat Vij Company Limited (UGVCL) is given the responsibility of distribution of electricity in the northern parts of the State of Gujarat. UGVCL operates through the network spread over 50000 Sq Kms covering six full districts in northern region of Gujarat and three part districts in western and central areas. These districts are Mehsana, Patan, Banaskantha, Sabarkantha, Gandhinagar and Ahemdabad.

• UGVCL obtained its Certificate of Commencement of Business in the FY 2003-04; however, the company could not commence its operations during the financial year ended 31st March 2004 and 31st March, 2005. The Company has started commercial function w.e.f. 1st April 2005.

D. Vision and Mission of UGVCL

• UGVCL desires to be amongst the best power utilities in the country who can also contribute towards social and economic development of the given area of supply, which is envisaged in its Vision statement which states: “To be world-class electricity utility, striving for the social and economic development of our region”

• The Mission statement of UGVCL States: “We meet the expectations of our customers and stakeholders by:

• Providing a sustainable, affordable, safe and reliable electricity supply

• Providing prompt and efficient customer services

• Developing and incentivising our employees

• Being the preferred equal opportunity employer

• Undertaking our business in an environmentally acceptable manner”

E. Category Wise Consumers and Sales

• Following Table shows the category wise No of Consumers and Sales for the FY 2009-10



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S. No. Particulars No of Consumers % of total

consumers Sales (MUs)

% of total sales

A LT Consumers

1 Residential 1,997,257 79.53% 1,093 8.96% 2 Commercial 237,604 9.46% 397 3.25% 3 Industrial LT 32,570 1.30% 678 5.56% 4 Public Water Works 12,266 0.49% 445 3.65% 5 Agriculture 221,802 8.83% 6,736 55.19% 6 Public Lighting 7,939 0.32% 38 0.31% LT Total (A) 2,509,438 99.93% 9,387 76.91% B HT Consumers

7 Industrial HT 1,880 0.07% 2,806 22.99% 8 Railway Traction 1 0.00% 12 0.10% HT Total (B) 1,881 0.07% 2,818 23.09% Grand Total (A + B) 2,511,319 100.00% 12,205 100.00%

• UGVCL is serving around 25 lacs of consumers of which the number of consumers in the Residential category is huge as compared to the other consumer category followed by Commercial and Agriculture. Both these categories are subsidised and hence affect the revenue of the UGVCL. The agriculture consumption remains the highest (~55% in FY10) and that too mostly (~46% of total) unmetered which is a cause of concern. The next highest consumption is of Industrial HT Category which was about ~23% during FY10.

F. IT Initiatives

• UGVCL has undertaken many initiatives to become the IT enable power Distribution Company which is the need of the hour at present. UGVCL has already established Energy Management Center at Gandhinagar which undertakes Feeder Meter Data Acquisition, Load Forecasting, GIS of network, energy audit, etc.

G. Human Resource Department

• The Company has taken series of proactive HR initiatives including need based training and development programmes with special emphasis on developing competencies of employees and thereby enhancing organizational effectiveness.

• The Company has provided various training and development activities for its staff at GETRI (The Training Centre of GUVNL at Baroda), Power Stations and even at external places.



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H. Administrative Division of UGVCL

• To cater such a widespread area of distribution network with around 25 lacs of consumer to be served, UGVCL has provided 121 Sub Division and 21 Division Offices throughout its operational area which are divided into four Circles. The business affairs are managed by Corporate Office presently headquartered at Mehsana.

I. Corporate Social Responsibility

• Gujarat is one of few states in the country where world population of Indian Sarus Crane is concentrated. On representation by wild life photographer and coordinator of Sarus Nature Conservation Society, regarding causalities of Sarus due to electrocution, UGVCL's decided to replace conventional wires by coated conductor to save the precious Sarus bird.

• As a part of its corporate social responsibility and as a part of ethical business practices, public image and sustainable development, UGVCL succeeded in reducing the casualties to Sarus Crane bird by its noble gesture.

J. Conservation of Energy

• To encourage the awareness of conservation of energy, UGVCL has adopted various measures in the past by way of introduction of compact fluorescent lamps (CFLs), increased awareness programmes for switching off the appliances completely instead of through remote devices etc.

• Some of the steps undertaken by UGVCL in relation to Conservation of Energy Measures are outlined below:

o Automatic Power Factor Controller panels were installed in the system network for reducing the technical losses.

o High loss feeders have been identified, close monitoring is being done up to the Sub-division level to reduce the technical losses

o The company has procured and installed CFL and electronic ballast for energy saving in its own office premises and residential colonies

o Provided Amorphous Transformers in Urban, Industrial and Jyotigram feeders for technical loss reduction



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K. Consumer Service

• The basic objective of the Company is to serve the consumers and provide the quality power supply. To achieve the objective, UGVCL has undertaken many consumer service related activities which includes Customer care center for booking online complaint of the customer of the company etc.

L. Major Achievements of UGVCL

• In past five years, UGVCL has achieved many milestones and has been recognised all over India as one of the efficient distribution company. The details of the achievement are as follows: Bronze Shield for 'Meritorious Performance in Electricity Distribution' during

2005-06 by Government of India. National Award for Excellence in Cost Management 2007 by ICWAI. First Prize winner in the category of Excellent in Rural Electrification awarded

by IEEMA Power Award 2008. 2nd India Power Awards 2009 in recognition for overall utility performance in

Agriculture Dominated Area. ‘Good Performance Award’ – under the category of Public - Service Sector –

Large for EXCELLENCE IN COST MANAGEMENT-2009 from ICWAI. 3rd India Power Awards 2010 under the category ‘Energy Efficiency,

Conservation and DSM”.

M. Operational Performance Analysis Demand Supply situation

• In past, UGVCL was facing a deficit during the peak hours which resulted into a load shedding. However, to provide quality power supply to all consumers for twenty four hours and eight hours continuous supply to agricultural sector, UGVCL decided to participate in the Jyotigram Yojana of Government of Gujarat. Due to such activities and adequate measures undertaken by UGVCL and GUVNL, there was no energy deficit in FY 2009-10.

Distribution Losses

• The following table shows the distribution loss trajectory over the 4 year period FY 07 to FY10. The increase in the loss during FY09-10 is due to the increase in loss in unmetered agriculture consumption. However, UGVCL has undertaken various activities to curb down the technical and commercial losses.

FY 06-07 FY 07-08 FY 08-09 FY 09-10

Distribution Loss 12.75% 16.81% 14.31% 16.87%



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Operating Indices

• The efficiency of the services of the distribution utility is identified based on the quality of power supply to the consumers which needs to be uninterrupted one. The operating indices as calculated by UGVCL in direction of the methodology specified by GERC have been highlighted in the following table.

Reliability Indices FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10

SAIFI 17.05 15.86 14.03 12.98 9.08

SAIDI 27:29 34:36:00 24:38:00 16:30:00 14:45:24

MAIFI 201.24 148.14 142.21 118.71 92.50

• As seen in the above table, the interruptions per consumers, the duration of interruptions per consumers, the duration of interruptions per consumers have been drastically reduced over the last five years.

Power Purchase Cost

• The Power Purchase cost has been showing an increasing trend in last five years, however there was a decrease in the power purchase cost per unit in FY 09-10 due to reduction in gas prices which were too high in FY 08-09.

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10

Units Purchased (MUs) 12,130 11,985 13,001 13525 15647

Value (Rs Crs) 2217 2502 2931 3720 3987

Per Unit Cost 1.83 2.09 2.25 2.75 2.55

Transformer Failure Rate

• Though the Distribution transformers failure rate is still high; efforts have been undertaken to bring down the transformer failures to less than 10%. The various remedial measures undertaken are such as Balancing of load of transformers, Effective maintenance work, providing Amorphous transformers, etc.

Particulars 2006-07 2007-08 2008-09 2009-10* Transformer Failure Rate 14.75% 12.62% 10.07% 8.04%



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Employee Rationalisation

• The following table shows the employee expenses per unit power sold. As can be seen from the table it is quite evident that the employee expenses have been increasing significantly

2005-06 2006-07 2007-08 2008-09 2009-10

Employee Expenses/Unit Sold 0.24 0.24 0.25 0.30 0.30 Support from GoG

• The State Government has capped the subsidy amount to the total of Rs. 1100 Crore which will be distributed to all the DISCOM in proportion to the agriculture consumption in the specified area.

Rs Crs 2005-06 2006-07 2007-08 2008-09 2009-10 Agriculture Subsidy 56,6.72 570.23 576.59 571.29 578.68

Revenue Realised Vs Cost of Supply

• In last five years, the revenue realized per unit of electricity sold (excluding government grant & subsidies & revenue from other income) is lower than the average cost of supply as highlighted in the following table.

2005-06 2006-07 2007-08 2008-09 2009-10

Revenue Realized 2.17 2.34 2.50 3.29 3.18 Cost of Supply 2.89 3.08 3.28 3.90 3.72

N. Financial Performance

• After analysis of the revenue statement and the Balance Sheet of the Company, it can be analysed that the dependence on the government subsidy as well as the income from other sources has been decreasing and revenue from tariff is increasing at a CAGR of 19%. Though there is a major increase in O&M expenses due to sixth pay commission and R&M activities carried out by the Company, there has been a profit due to power purchase cost under control due to steps undertaken by GUVNL.

• The fixed Assets and CWIP has been increasing by 9 % and 25 % respectively due to frequent augmentation and expansion of distribution system to cater the load growth in the area. The CAPEX plan undertaken includes re-enforcement of the system to provide quality, security and availability of power supply to the consumers, to undertake system development to meet the load growth, achieving



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the targeted reduction in system losses, undertake automation and other improvement works to enhance customer service. Also, the debt : Equity ratio of 3 is considered to be in favourable position due to low gearing ratio and therefore is having a sound financial position to get additional fund to carry out their additional CAPEX.

• However, the Quick Asset Ratio (Current Asset Ratio) is lower than 2:1 which is considered to be efficient current asset ratio as such. This is due to increase in current liabilities compare to current asset affecting the working capital of the company. This indicates that liquidity position of the company needs to be improved to meet the quick liquidity requirement to meet the operation of the business.

• The basic need/objective of incurring the capital expenditure is to upgrade the ageing and weak distribution network to desirable standards so as to provide better network reliability and sustainable performance. Capital expenditure incurred by the UGVCL in FY 2009-10 was Rs.220 Crores. The scheme-wise capital expenditure incurred in FY 2009-10 is as shown below.

Schemes FY 2009-10 Distribution Schemes 153 Rural Electrification Scheme

38

Non Plan Schemes 21 Others New Schemes 8 Capital Expenditure Total 220

O. Power Sector Scenario

• The Indian economy has been witnessing more than 9% growth rate in last three years resulting in major dependent on power to carry out the activities related to production and service affecting the economy. The developing economy has resulted into increase in demand of power whereas the capacity available within the country is not suffice enough to meet such demand resulting into peak and energy deficit. The growth in demand of electricity and National plan to have a per capita consumption of 1000 units, Indian government has set ambitious goals in the 11th plan to add around 100,000 MW capacities.

• However, the Western region accounts for ~32% of the total generation in the country and also has the highest deficit in the country. The Western region is facing a shortage of nearly 18% in FY 2009-10. The region wise demand supply scenario is



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shown below:

Regions Energy Requirement (MU) % deficit Peak Demand (MW) % deficit North 254231 12% 37159 15% West 258528 14% 39609 18% South 220576 6% 32178 10% East 87927 4% 13220 6% N. East 9332 11% 1760 18% All India 830594 10% 123926 13%

Source: CEA report on Monthly power supply position.

• In the past, there has been a consistent gap in the peak demand and peak met as well as in energy terms in the State. Considering the performance in past few years, Gujarat Power Sector has improved a lot with no energy deficit within the State and having a per capital consumption of more than 1000 units which is the target of Indian Government to achieve it by 2012 for India as a whole. The following table shows the actual power supply situation in the state for the past few years.

Period Peak

Demand Peak Met

Peak Deficit / Surplus


Energy Requirement

Energy Availability

Energy Deficit / Surplus


(MW) (MW) (MW) (%) (MU) (MU) (MU) (%) 2002-03 8641 7336 -1305 -15.1 60175 53316 -6859 -11.4

2003-04 9820 7204 -2616 -26.6 57171 50292 -6879 -12

2004-05 10162 7578 -2584 -25.4 59681 52724 -6957 -11.7

2005-06 9783 7610 -2173 -22.2 57137 52436 -4701 -8.2

2006-07 11619 8110 -3509 -30.2 62464 54083 -8381 -13.4

2007-08 12119 8885 -3234 -26.7 68747 57614 -11133 -16.2

2008-09 11841 8960 -2881 -24.3 67516 60885 -6631 -9.8

2009-10 10,406 9,515 -891 -8.6 70,412 67,263 -3,149 -4.5

• The negligible deficit in the State will be eliminated within the immediate future by contracting the additional capacity for the Company by GUVNL.

P. Regulatory Framework National Level:

• The implementation of the Electricity Act, 2003 (EA 2003) has effected considerable changes the electricity market. The major changes relevant to working of a distribution company are as under:

o Delicensing of generation;



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o Thrust to complete the rural electrification and provide for management of rural distribution by Panchayats, Cooperative Societies, non-Government organizations, franchisees etc

o Provision for license free generation and distribution in the rural areas;

o Introduction of open access in transmission and distribution;

o Introduction of parallel license – exclusivity of distribution license removed;

o SERC is a mandatory requirement ;

o Provision for payment of subsidy through budget by State Government;

o Issues concerning theft and losses in the system;

• The provisions of the EA2003 mentioned above, have far reaching implications for the power sector. It is evident from the above provisions that the EA2003 intends to create a competitive power sector in the long term and has left no choice for the state utilities but to improve their performance to face the competition from other players entering into the market.

• Also, in line with Electricity Act 2003, the National Electricity Policy outlines a plan for rural electrification, increased generation capacity, generation mix to be adopted for clean environment, improvement in grid for better transmission and distribution of power. India also seeks to create a more competitive energy sector to increase private sector participation. Finally, the Policy emphasizes the need for conservation and demand-side management including a national awareness campaign. In line with the above policy, the distribution company has to undertake activities to be more competitive as well as to abide by the policy guidelines. The policy aims at improving efficiency, financial availability of the sector, availability of power and protection of customer interest.

• The National Tariff Policy deals with various parameters with respect to the fixation of tariffs, like providing adequate return on investment to the power generator and supplier and ensuring reasonable user charges for the consumers. It provides uniform guidelines to the SERC for the fixation of tariffs for their respective entities. The policy states that the distribution licensee should, in future, procure power solely through competitive bidding which as per the recent guidelines from Ministry of Power will be in effect from 5th January 2011.



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• At the National level, many initiatives have been considered by MoP, GoI and CERC with a view to develop the power sector. The initiatives described in the report are as follows:

o Rural Electrification Policy, 2006

o R-APDRP (Restructured Accelerated Power Development & Reform Program)

o Renewable Purchase obligation with Renewable Energy Certificate Mechanism

o National Action Plan for Climate Change (NAPCC)

o National Solar Mission

o National Mission for Enhanced Energy Efficiency

State Level

• The regulatory framework in the State of Gujarat is well established. The Gujarat Electricity Regulatory Commission (GERC) has already defined most of the regulations and is monitoring performance with a positive approach of improving efficiency and overall development of the sector. Current Regulations relevant to company are as follows:

o Terms and Conditions of Tariff Regulations, 2005

o Standards of Performance of Distribution Licensee Regulations, 2005

o Procurement of Energy from Renewable sources Regulation

o Power System Management Standards, 2005 – Distribution

o Intra-State ABT implementation

o Provisions of Intra – State Open access regulations

o Licensee’s Power to Recover Expenditure incurred in providing Supply and other Miscellaneous Charges (First Amendment) Regulations, 2010

o Different Orders on determination of tariff for renewable sources of energy

o Designating State Nodal Agency for REC Regulations

Q. Market Issues and Challenges

• The power distribution business environment would throw up a number of market-related issues and challenges which needs to be evaluated by UGVCL. Some of these issues and challenges are as follows:

o Open Access: mandated to provide non-discriminatory open access which may result in loss of subsidising consumers;

o Parallel license: As per the Act, a parallel licensee is possible to be operated



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whereby two licensees are supplying power in the same specified area. Currently, due to recent clarification from MoP and Ministry of Commerce, SEZ became the Distribution Licensee for the SEZ area whereby company is supplying power. Also, other companies may get an approval of being a distribution licensee to supply power in the specified area of Company which is more prevalent in urban areas due to low losses and are marked by the non-existence of agriculture consumers.

o Regulatory provisions – Being into a regulated environment, have to follow the regulatory framework and directions by the appropriate commission.

o Industry Risk and Competition: A competition from the other private sector player due to opening of power sector will result into a risk of losing of subsiding consumers.

o Renewable Purchase Obligation (RPO): SERC mandates the distribution licensee to purchase of electricity from renewable sources, a percentage of the total consumption of electricity in the area of a distribution licensee. This step is considered to promote the generation from such renewable sources and can have a minimum impact on the environment.

o Impact of DSM Regulations: Demand Side Management (DSM) is described as the planning, implementation and monitoring of utilities activities designed to encourage customers to amend their electricity consumption patterns, both with respect to timing and level of electricity demand so as to help the customers to use electricity more efficiently. Every Distribution Licensee has to implement the DSM measures as an integral part of their day-to-day operations. Many SERCs and Discoms have already introduced some DSM programs. Experience suggests that the skills of discom staff, and the priority accorded to it by discom management, are important for its success. DSM incentives need to be carefully designed and targeted so that the appropriate load curve changes are realized.

o Intra-State ABT implementation – UI Implication: UI at intra-state level due to deviation in schedule and actual will make each DISCOM accountable. A proper planning and scheduling of power alongwith implementation of SCADA is required to have efficient distribution system.

o Universal Service Obligation: The Company is obliged to supply power to each consumer under USO. New connections to remote areas are expensive and maintaining reliable supply levels are difficult. These features tend to increase technical losses and the costs of O&M.



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o Market Penetration and service area: The widespread distribution network and the retail reach of such infrastructure would be key discriminators of a licensee’s market position.

o Cost to serve against average Realization: The tariff of the consumers needs to progressively move towards the cost of supply of electricity and reduces the cross subsidies within the category of consumers. This has to be achieved by all the Distribution Utilities in India which is considered to be a major challenge for SERC and Utilities.

o Rationalization of tariffs to retain HT & large Consumers: Currently, the Tariff is calculated based on cost of the supply at consumer end, the capacity of the consumer to pay and the socio economic policy of the government. The rationalization of tariffs is required simplify the structure and introducing cost reflective tariff by way of retaining the high end customers.

• Understanding these core issues & risks of the power sector help in identifying the opportunities that lie ahead

R. SWOT Analysis

• Before outlining the Business Plan for any company, it is very important for the organisation to introspect to identify its strength and weaknesses and assess the external environment to outline opportunities and threats. Accordingly, it is very important to evaluate the environment – both internal and external while charting out its growth path and the same has been outlined below.

Helpful In achieving the objective

Harmful In achieving the objective

Inte

rnal

Ori

gin

Att

ribu

tes

of th

e O

rgan

isat

ion

STRENGTHS

Experienced Manpower

Technical expertise

Healthy growth in sales

Novel Initiatives

WEAKNESS

Ageing distribution Infrastructure

Unmetered Agricultural consumers

Ageing Employees

Planning of Manpower requirement

Irrational tariff structure

Exte

rnal

Ori

gin

Att

ribu

tes

of

the

Envi

ronm

ent

OPPORTUNITIES

Public Private Partnership

Infrastructre Upgradation

Non conventional energy

Ancilliary Services

IT Initiatives

Competitive Bidding

THREATS

Non Discriminatory Open Access mandatory

Regulatory Risk & inconsistencies

SEZ license Area

Operational variations



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S. Risk Analysis

• It is necessary to understand that how the risks are perceived by the business. Virtually all organisations strive to survive. They strive to create value for their stakeholders including State Government, SERC, Consumers, Financial institutions, etc. The risk can be identified as a financial risk, regulatory risk, operating risk, technology risk, etc. o Improve Efficiency: In order to be competitive on the distribution segment,

UGVCL has to improve operational efficiency. The efficiency can be achieved through reduction of losses, quality power supply and upgradation of network.

o Improvement in Consumer Services: Due to inclusion of Open Access and Parallel License under the amended Electricity Act 2003, a consumer of UGVCL will always have a choice to avail supply of electricity from any other Distribution licences other than UGVCL in case of proper service, continuous power supply or cheap power. Therefore, a constant improvement in Consumer service will be required to avoid chances of losing the consumers.

o Project Management and Execution: A key element of the implementation of infrastructure plan is to execute project on a timely manner and is managed in a judicious way. To meet the investment objectives & improving the existing infrastructure of Distribution System, UGVCL needs to review the timely implementation and completion of Infrastructure plan.

o Recovery of Arrears: Even though UGVCL has a collection efficiency of 100%, still there are some arrears which need to be targeted and collected.

o Regulatory awareness: Regulatory risks will have to proactively deal with to minimise the impact on Company as well as Consumer Interest and therefore a capacity building is required to provide training to the employess for creating awareness related to regulatory provisions.

T. Future Business Opportunities

• While the SWOT analysis has revealed a number of opportunities, Company may be targeting some of the opportunities in the near future. The key opportunities which could be targeted are: o Equity Financing from Capital Market - Initial Public Offer (IPO); o

Public Private Partnership - Creation of Special Purpose Vehicles (SPVs) / Joint Ventures;

o Also, in terms of business opportunities that UGVCL could target in the future o Providing Ancillary Services to other power sector players;



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o Professional Meter Testing Facility o Harness Non Conventional Energy sources o Adopt Distribution Franchisee Route for high loss areas

• To avail opportunities for the future, Company has to rapidly ramp up its existing technical staff to meet the objectives and gain advantage from the business opportunities. Company is making arrangements for Training of the existing staff to undertake future responsibilities as well. Apart from Human Resources Development, Company has to focus on the Environment related aspects to adhere to pollution control norms. However, the key aspect would be being operationally efficient to be able to match the efficiencies of private sector players. Commercial efficiency would be the focus.

• Company is also making efforts to tackle the problem of enhanced manpower requirement including employee attrition and scalability constraints.

• Thus, the short term outlook for company would be primarily to focus on improvement of its operational performance and have a efficient consumer. With the additional generation capacity being planned in the system, Company can look at fulfilling the ever growing demand for the State. Also, while Company has started looking at diversification by considering renewable energy, ancillary services, etc, this could be looked at contributing in a significant manner in the future business of the company.

• Company has prepared the Business / Operational Plan taking cognisance of the existing internal factors and external business environment affecting the business. It is submitted that the Business plan being a dynamic document may need to be updated at periodic intervals taking into account the changes in the internal and external environment and these changes would be intimated to the Hon’ble Commission from time to time.

U. Operational Plan

• The operational plans include the estimates of each cost of the Company for the second control period (from FY 2011-12 to FY 2015-16) and are in line with the MYT petition. The costs are estimated based on certain assumptions, past trend and extrapolated for future period.

• Sales Projections: It has been observed from past experience that the historical trend method has proved to be a reasonably accurate and well accepted method for estimating the load, number of consumers and energy consumption. In light of the



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above, UGVCL has estimated the above for various customer categories primarily based on the CAGR trends during past years. Following table shows the 5 year as well as 3 year CAGR for the category wise sales.

Sales (MU)5 years CAGR FY 10 over 06

3 years CAGR FY 10 over 08

FY 10 over FY 09

Low Tension ConsumersResidential 10.09% 8.06% 6.5%Commercial 15.25% 15.81% 13.4%Industrial LT 5.08% 4.57% 10.2%Public Water Works 6.73% 8.79% 10.1%Agriculture 5.47% 7.43% 10.7%Street Light 5.22% 5.72% 2.7%LT Total 6.33% 7.66% 10.2%High Tension ConsumersIndustrial HT 16.99% 14.78% 17.8%Railway Traction 2.20% 4.45% 0.0%HT Total 16.90% 14.73% 17.8%

TOTAL 8.36% 9.17% 11.9%

• Agriculture (Metered): UGVCL, based on internal targets is planning to release new connections under this category. Accordingly, the additional connected load expected in this category is going to increase based on its average HP of Discom. For calculation of sales, average consumption of unmetered and metered consumers is considered. In Gujarat, the average consumption of metered consumer is around 700 kWH/HP/Annum and consumption of unmetered consumer is 1700 kWH/HP/Annum so for projection of sales for additional connection, 1200 kWH/HP/Annum is taken.

Agriculture MetedNo. of

ConnectionsAverage HP of

Discom HP Increase MW IncreasePer HP

ConsumptionAdditional Sale (MU)

FY 2010-11 17 - - 1,200 - FY 2011-12 3,700 17 62,168 46 1,200 75 FY 2012-13 3,700 17 62,168 46 1,200 75 FY 2013-14 3,100 17 52,086 39 1,200 63 FY 2014-15 2,600 17 43,685 33 1,200 52 FY 2015-16 2,600 17 43,685 33 1,200 52

• Considering the above growth rates annually the category wise sales have been projected as shown on the following table.



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FY 2011-12(Projected)





A LT Consumers1 Residential 1,417 1,560 1,717 1,891 2,082 2 Commercial 553 638 735 847 976 3 Industrial LT 749 787 827 869 913 4 Public Water Works 507 541 577 616 658 5 Agriculture 7,191 7,266 7,328 7,381 7,433 6 Public Lighting 38 40 42 44 46

LT Total (A) 10,455 10,831 11,226 11,647 12,108 B HT Consumers7 Industrial HT 3,627 4,243 4,964 5,807 6,793 8 Railway Traction 13 13 13 13 14

HT Total (B) 3,639 4,256 4,977 5,820 6,807 Grand Total (A + B) 14,094 15,086 16,203 17,467 18,915

S.No. ParticularsSales (MUs)

• As seen from the above tables, the Residential, Commercial and industrial HT

consumers have been contributing the maximum share in sales.

• Distribution Loss: The Company has achieved a significant reduction in distribution losses, during recent years. These efforts shall continue and will be enhanced. However, loss reduction is a slow process and becomes increasingly difficult as the loss levels come down. It is assumed that for initial 4 years of control period the losses will reduce by 0.5% and for fifth year it is assumed to be reducing by 0.25%.

ParticularsFY 2011-12(Projected)





Distribution Loss 13.50% 13.00% 12.50% 12.25% 12.00%

• Energy Balance: The energy requirement for UGVCL will be met by supply from GUVNL. Based on the sales and distribution provided above, Energy Balance of UGVCL for the second control period FY12-FY16 is as shown below:

S.No. Particulars UnitFY 2011-12(Projected)





1 Energy Sales MUs 14,094 15,086 16,203 17,467 18,915 MUs 2,200 2,254 2,315 2,438 2,579

% 13.50% 13.00% 12.50% 12.25% 12.00%3 Energy Requirement MUs 16,294 17,340 18,518 19,905 21,494

MUs 759 798 842 894 966 % 4.45% 4.40% 4.35% 4.30% 4.30%

5Total Energy to be input to Transmission System

MUs 17,053 18,138 19,360 20,799 22,460

6 Pooled Losses in PGCIL System MUs 357 456 535 603 546 7 Total Energy Requirement MUs 17,410 18,594 19,895 21,402 23,006

2 Distribution Losses

4 Transmission Losses



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• Power Purchase Cost: The total power purchase cost for GUVNL consists of the basic power purchase cost, transmission charges payable to GETCO and PGCIL, GUVNL cost. Based on the same, the total power purchase cost for GUVNL during the control period FY12 to FY16 is as shown in the following table.

YearDiscom

Fixed Cost (Rs Crs)

Discom Variable Cost

(Rs Crs)

Total Power Purchase Cost

(Rs Crs)

Trading Fixed Cost (Rs Cr)

Trading Variable Cost

(Rs Crs)

Profit & Trading Margin

(Rs Crs)

Total Trading Revenue (Rs

Crs)

Net Cost (Rs Crs)

FY 2011-12 8,125 11,348 19,473 798 1,115 600 2,513 18,075 FY 2012-13 11,126 11,793 22,919 1,203 1,275 700 3,177 21,016 FY 2013-14 12,473 13,233 25,705 1,451 1,540 800 3,791 23,454 FY 2014-15 13,902 13,850 27,752 1,713 1,706 900 4,319 25,139 FY 2015-16 18,356 13,702 32,059 2,358 1,760 1,000 5,119 28,700

• Aggregate Revenue Requirement The Aggregate Revenue Requirement for FY 2011-12 has been determined as Rs 5511 Crores. The Table below shows projection of Aggregate Revenue Requirement by UGVCL under MYT second control period FY 2011-12 to 2015-16.

Rs in Crores

Sr. No. ParticularsFY 2011-12(Projected)





1 Cost of Power Purchase 4,849 5,767 6,572 7,191 8,386 2 Operation & Maintenance Expenses 324 343 362 383 405

2.1 Employee Cost 269 284 300 317 336 2.2 Repair & Maintenance 68 72 76 80 85 2.3 Administration & General Charges 38 40 42 45 47 2.4 Other Debits 6 6 7 7 8 2.5 Extraordinary Items 1 1 1 1 1 2.6 Net Prior Period Expenses / (Income) (4) (4) (4) (4) (5) 2.7 Other Expenses Capitalised (53) (56) (59) (63) (66) 3 Depreciation 162 180 198 215 234 4 Interest & Finance Charges 93 96 95 93 90 5 Interest on Working Capital 62 72 82 90 103 6 Provision for Bad Debts 7 8 9 10 11

7 Sub-Total [1 to 6] 5,496 6,466 7,318 7,982 9,229

8 Return on Equity 105 118 129 140 151 9 Provision for Tax / Tax Paid 1 1 1 1 1

10 Total Expenditure (7 to 9) 5,603 6,585 7,448 8,123 9,381 11 Less: Non-Tariff Income 92 92 92 92 92

12 Aggregate Revenue Requirement (10 - 11) 5,511 6,493 7,356 8,031 9,289



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2. Introduction

2.1 Background

2.1.1 As per the enactment of the Electricity Act, 2003 and the Gujarat Electricity Industry (Reorganization and Regulation) Act, 2003, Government of Gujarat transferred the assets, liabilities, proceedings and personnel from Erstwhile Gujarat Electricity Board (GEB), into six successor transferee Companies i.e. one Generation Corporation, one Transmission Corporation and four Distribution Companies through various Notifications, Government Resolutions and Transfer Schemes. These successor transferee Companies are:

a) Gujarat State Electricity Corporation Limited (GSECL) - (A Generation Company) b) Gujarat Energy Transmission Corporation Limited (GETCO) - (A Transmission

Company) c) Four Distribution Companies:

a. Dakshin Gujarat Vij Company Limited (DGVCL) b. Madhya Gujarat Vij Company Limited (MGVCL) c. Uttar Gujarat Vij Company Limited (UGVCL) d. Paschim Gujarat Vij Company Limited (PGVCL)

2.1.2 As per resolution of Government of Gujarat, a new company named Gujarat Urja

Vikas Nigam Ltd. (GUVNL) was incorporated in December, 2004 to carry out the residual functions (including power trading) of the erstwhile GEB.

2.1.3 Uttar Gujarat Vij Company Limited (UGVCL) is given the responsibility of distribution of electricity in the northern parts of the State of Gujarat. UGVCL operates through the network spread over 50000 Sq Kms covering six full districts in northern region of Gujarat and three part districts in western and central areas. These districts are Mehsana, Patan, Banaskantha, Sabarkantha, Gandhinagar and Ahemdabad.

2.1.4 UGVCL is one of the distribution companies engaged in distribution of electricity in the north zone of Gujarat. UGVCL obtained its Certificate of Commencement of Business in the FY 2003-04; however, the company could not commence its operations during the financial year ended 31st March 2004 and 31st March, 2005. The Company has started commercial function w.e.f. 1st April 2005.



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2.1.5 As a step further of deepening its enterprise capability and capitalizing growth opportunities, the management of UGVCL has carved out big expansion plans which will not only allow UGVCL to increase its volume of power distribution but also fresh investment in increasing line network (including renovation, refurbishment and system up gradation) will reduce the distribution losses and increase in productivity. The exercise will also lead to a marked improvement in the Financials of the company.

2.1.6 Organisational development and institutional strengthening are the supporting factors that transform UGVCL into a commercially viable vibrant organisation. Therefore, systemic improvements like business process re-engineering, best practices, information technology initiatives, performance management system and human resource development and involvement needs to be formulated and implemented across the organisation in a standardised manner.

2.1.7 Apart from internal reforms – institutional strengthening and organisational development – UGVCL also needs to gear up to the regulatory challenges, both in terms of operational efficiency and commercial & financial implications of the same.

2.2 Business Activities

2.2.1 The Company is a Distribution Licensee within the meaning of Section 2(17) of Electricity Act 2003 and pursuant to the Section 14 of the Electricity Act. Further, Section 42 and 43 of the Electricity Act 2003 prescribes the following duties of the Distribution Licensee:

• To develop and maintain an efficient, co-ordinated and economical distribution system;

• To supply electricity on an application of the consumer in accordance with the provisions specified in the Electricity Act 2003;

• To provide non-discriminatory open access to the consumers;

• To establish a forum for redressal of grievances of the consumers;

2.2.2 The Main Object to be pursued in terms of the Memorandum of Association of the

UGVCL is: -

To undertake the electricity sub-transmission distribution and retail supply in the



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State of Gujarat or outside the State and for this purpose to plan, acquire, establish, construct, erect, lay, operate, run, manage, maintain, enlarge, alter, renovate, modernize, work and use a power system network in all its aspects and also to carry on the business of purchasing, selling, importing, exporting, wheeling, trading of electrical energy, including formulation of tariff, billing and collection thereof and then to study, investigate, collect information and data, review operations, plan, research, design and prepare project reports, diagnose operational difficulties and weaknesses and advise on the remedial measures to improve and modernize existing sub-transmission and supply lines and sub-stations.

2.3 Objective of Business Plan

2.3.1 It is important that UGVCL has a complete re-look at its business in view of the current environment to develop a holistic way forward for the organisation. The Forum of Regulators (FOR) in its report on MYT framework has recommended as under:

“6.1.1 Annual revision of performance norms and tariff might not be desirable. During the first control period, which should not be more than three years, the opening levels of performance parameters should be specified as close to the actual level of performance as possible and a trajectory of improvement of norms to desired level be provided with an incentive and disincentive mechanism to share efficiency gains with consumers.”

2.3.2 The FOR Report recommends that the norms for the first Control Period to be specified as close to actual level of performance as possible. FOR Report also emphasises on specifying a trajectory to achieve desired levels of norms, which entails fixing of performance trajectory on normative basis rather than at actual levels for the second Control Period onwards.

“Distribution licensees should submit the business plan and power purchase plan, for approval of the Commission, at least six months prior to submission of MYT petitions”

2.3.3 This effectively requires the Utilities to submit their MYT Petitions on or before 30th November of the previous year for which tariff has to be determined. The FOR recommendations provides for submission of Business Plan six months prior to submission of MYT Petition, i.e., 30th November. Hence, date for submission of



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Business Plan would be 31st May. But in the present context, as the date has already passed for the second Control Period, it would be difficult for Utilities to file a Business Plan as per FOR recommended timelines.

2.3.4 Hence as directed by the Hon'ble commission Business Plan for the second Control Period is to be filed along with the MYT filings for the second Control Period. Keeping the above discussion in mind, UGVCL has developed a comprehensive business plan for the company for the period FY 2011-12 to FY 2015-16. The business plan in following sections intends to cover the above issues from the strategic, competitive, financial, commercial and organisational perspectives.

2.4 Approach to Business Plan

2.4.1 The Business Plan is initiated based on a review of “what is” on the company’s current operations, operational performance and organisation structure. The formulation of strategies is driven by the consideration of the vision, mission and values that the Company holds and cherishes. The existing profile of the Company, its strengths and weaknesses, its policies, and the emerging legal and business environment plays an important role in the formulation of the plan. This stage also captures its role in Gujarat power sector and its technical and commercial relationships with the other utilities operating in the state.

2.4.2 The Business Plan has been developed keeping in view the current performance over the previous year with a view to develop targets that are realistic and achievable and that provide an impetus to improving performance.

2.4.3 It is important that UGVCL tries to meet the performance as per the projections.

There is therefore a need to ensure internalisation of these projections so that targets can be identified at the working level to ensure compliance. That is to say that there is a need to disaggregate the projections to lower levels so as to involve the Circles in process and also to convey the direction in which the company is headed.

2.4.4 The approach and methodology adopted for preparation of Business plan of UGVCL

is as follows. The business plan is prepared for the projection period FY 2012 to FY 2016. The assumptions like investment plan, load forecast, loss reduction plan, power



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procurement plan etc. are maintained as provided in MYT petition for second control period FY 2011-12 to 2015-16

2.4.5 This Strategic Business Plan is intended to chart the Company’s way forward. It acts as an “engine for change” and aims to consolidate the various ideas and proposed course of action together with a common thread, to take the Company into the future. The Plan will enable the Company to harness its resources so as to develop a desired commercial orientation.

2.4.6 This business plan is developed for the Control period bearing in mind the growth plan for the control period after considering the strength and weakness of the company and evaluating its business environment. The business environment has evolved considerably in a number of ways that affects UGVCL’s strategic planning. The Business Plan is intended to give a comprehensive and up-to-date representation of the company, its market, the impact of new regulations, and the strategies that has been developed by UGVCL to achieve the company goals, to carry out its mission and reach its vision. However, there are number of internal and external factors which affect the planning of the company and thus it makes this document a very dynamic document and which calls for regular reviews of the plan with a view to introduce any mid-term corrections.

2.4.7 Due to changing business environment and the regulations governing the Distribution business, it is submitted that Hon’ble Commission should take cognizance of the fact that the business plan is a dynamic document which may need to be updated at various intervals to align the growth path of the company with the external business environment and internal factors affecting the business / operations of the company. Depending on the amount and complexity of the content that needs to be updated, one could distinguish two levels of update. On a lower level, there is detail and factual updates that require changes within the business plan. Factual updates are relatively straight forward and mostly comprise minor changes of specific data, such as numerical or other factual information. At the higher level, there is the conceptual update. Conceptual updates may be dictated by an market shifts, changes in the competitive environment, legislative reforms, political influence and many other factors, and thus, require deeper analysis, and more profound changes in the business plan. Thus, updation of the Business Plan would be dependent on the management as they would have to decide which events and changes are important and how they need to be reflected



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in the business plan.

“Business Plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.”



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3. UGVCL Profile

3.1 Background

3.1.1 The Government of Gujarat (GoG) notified the Gujarat Electricity Industry (Reorganization and Regulation) Act 2003 (hereinafter referred to as the “Act”), in May 2003, for the reorganization of the entire power sector in the state of Gujarat. Pursuant to the above, GoG in its letter vide GO/19th August, 2003, had directed the Gujarat Electricity Board (hereinafter referred to as GEB) to form four Distribution Companies (Discoms), based on geographical location of the circles.

3.1.2 Accordingly, the four distribution companies had been incorporated with the

Registrar of Companies on 15th September, 2003. One of the distribution companies, UGVCL is engaged in the distribution of electricity in the north zone of Gujarat. On 15th October, 2003, UGVCL obtained its certificate of Commencement of Business.

3.1.3 GEB was engaged in the business of Generation, transmission and supply of

Electricity under the provisions of the law prior to enactment of Electricity Act 2003 and have been re-organised under Section 131 and 133 of the Electricity Act 2003. Therefore, the successor entities of GEB are considered as a Deemed Licensees under the proviso (1) of the Section 14 of the Act and in line with the given provisions, UGVCL is a deemed distribution licensee for supplying electricity in north zone of Gujarat.

3.1.4 With a Vision to be World Class Electricity Utility striving for social and economic

development of the assigned region with a mission of 'Consumer Satisfaction through Service Excellence'.

3.2 Vision and Mission of UGVCL

Any organization's vision is all about what is possible, all about that potential. The mission is what it takes to make that vision come true. The long term goals are set keeping the vision statement in mind but mostly the short term targets are influenced by the mission statement. All these inter woven together create an identity for the company which gives a unique image to the company and develops



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the company culture. Each and every team member contributes to the realization of these goals, targets and the image carving of the company.

3.2.1 Vision

“Vision without action is merely a dream, Action without vision merely passes time, Vision with action can only change the Organisation”.

The Vision should define what an organization will become at the end of the strategic planning horizon. The Vision is a “future state” description of what we aspire to become and what will be pursued. A Vision needs to identify strategic objectives with wide appeal looking for shared values and ideals. A vision needs to be linked with the core competencies of the business and its necessary to assess continually and refine the vision to make it more appealing and credible. UGVCL desires to be amongst the best power utilities in the country who can also contribute towards social and economic development of the given area of supply, which is envisaged in its Vision statement which states:

3.2.2 Mission

“A mission statement outlines what the company is now. It focuses on today; it identifies the customer(s); it identifies the critical process (es); and it states the level of performance.”

The Mission Statements of the Organisation needs to specify the organizational purposes and translate these purposes into objectives that can be assessed and controlled. Developing a mission statement can help reveal and resolve divergent views among the stake holders and their importance for the Company. They are effective vehicles for communicating with important internal and external stakeholders.

To be world-class electricity utility, striving for the social and economic development

of our region



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We meet the expectations of our customers and stakeholders by:

• Providing a sustainable, affordable, safe and reliable electricity supply

• Providing prompt and efficient customer services

• Developing and incentivising our employees

• Being the preferred equal opportunity employer

• Undertaking our business in an environmentally acceptable manner

3.2.3 Values

“The values are the whole aura engulfing each and every thought, word, deed and action taking place in your organization”.

The value statement prescribes the principles that company will follow to achieve its Vision and Mission. All organization follows a set of values that defines ethical and moral benefits. Value statement is not explicitly stated but taken to be a part of Vision and Mission statements. The Value statements of UGVCL are as identified below:

• Respect

• Honesty

• Loyalty

• Ethical business conduct

• Pride and Ownership

• Service excellence

• Superior performance

• Team culture

3.3 Operating Structure of UGVCL

3.3.1 Company operates through the network spread over 50000 Sq Kms covering six full districts in northern region of Gujarat and three part districts in western and central areas. The consumers' mix consisting of various categories such as residential, commercial, industrial, agricultural and others, is served by 127 Sub Division and 21



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Division Offices throughout its operational area divided into four Circles. The business affairs are managed/taken care of by Corporate Office presently headquartered at Mehsana. The operations are managed by more than 7,300 employees who contributed to business turnover of more than Rs. 4,500 Crores in 2008-09.

Figure 1: Area map of UGVCL

3.4 Overview of UGVCL

Area in Sq. KM. : 49950 Districts covered : 6+3 (Partly) Talukas covered : 56+9 (Partly) Towns : 43 Villages : 4628 Divisions : 21 REC Divisions : 0 Rural Sub Divisions : 101 City Sub Divisions (city/urban/Ind) : 17 REC Sub Divisions : 05 Number of Employees : 6943 Total Consumers : 25,70,300 Total Transformer Canters : 1,21,758 M.U.S. Sent out upto Jul-10 (Inclu.EHT) : 4014



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M.U.S. Sold out upto Jul-10 (Inclu.EHT) : 3271 % AT & C losses : 18.50 HT Line (Km.) : 72,282 LT Line (Km.) : 62,765 LT / HT Ratio : 0.86 No. of Sub Station : 332

3.5 Category wise no. of consumers

Figure 2: Category wise number of consumers 2009-10

3.5.1 As can be seen from the above figure, the number of consumers in the Residential

category is huge as compared to the other consumer category followed by Commercial and Agriculture. Both these categories are subsidised and hence affect the revenue of the UGVCL.

3.6 IT Initiatives

3.6.1 UGVCL is striving to improve performance by IT enabling of power distribution

activity. For the purpose, the Company has established Energy Management Center at Gandhinagar which is a major step forward in this direction. The major activities of Energy Management Centre are:



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o Feeder Meter Data Acquisition o Load Forecasting & Management o Automated Remote Meter Reading of Major Consumers o Power Purchase/ ABT Management o Energy audit o GIS (Geographic Information System) of distribution network o SCADA o Network analysis and improvement o Consumer Monitoring & Loss accounting system o Centralized Call Centre for consumer complaints o Control Room for disaster management o Business Intelligence

3.6.2 UGVCL also started the online energy bill payment for the consumers through HDFC Bank. Through this, the consumer can see the monthly Bill and make the payment through bank account.

3.6.3 The supply of electricity to each and every citizen is one of the most challenging

operations as it involves,

o forecast the demand of energy accurately o procure power to meet demand at most economical cost o manage power demand to availability of power o ensure high reliability of power supply o reduce AT&C / T&D losses o improve consumer satisfaction

3.6.4 The IT enabled environment at EMC can help in revenue protection activity, improving reliability, energy audit, network improvement etc. for better operational functioning of UGVCL.

3.7 Human Resource Management

3.7.1 HR Department of UGVCL other than undertaking routine HR work has also contributed in areas of quality, customer relations and energy conservations.

3.7.2 HR Department has taken lead as far as getting of ISO certification for UGVCL

thereby contributing towards quality improvement. 3.7.3 UGVCL’s HR Dept. strongly believes in training for better development of employees



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and thereby prepared structural need based training calendar for its employees from Class IV to I.

3.7.4 Discipline is an important aspect for running an organization and the HR Department

believes in fare and timely actions as far as disciplinary actions for its employees. 3.7.5 HR Department has also taken a lead as far as use of e-urja is concerned and its

major functions like confidential reports, employee’s traceability and all other employees’ related reports are now on line.

3.7.6 Administrative Division of UGVCL 3.7.6.1 The consumers' mix consisting of various categories such as residential,

commercial, industrial, agricultural and others, is served by 121 Sub Division and 21 Division Offices throughout its operational area divided into four Circles. The business affairs are managed by Corporate Office presently headquartered at Mehsana.

Figure 3: Administrative Structure of UGVCL

Business Plan for UGVCL for the Control Period FY12-FY16

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3.7.7 Organisation Chart of UGVCL Corporate Office

Figure 4: Organisation Structure of UGVCL



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3.7.8 Roles and Responsibility

Technical

1. Responsible for overall Operation and Maintenance of Distribution System in the company;

2. Monitor the distribution losses and loss reduction targets

3. Monitor the work of preparation and approval of various Rural Electrification, System improvement and Renovation & Modernization Schemes;

4. Review of the physical and financial progress of these Schemes;

5. Approve appropriate compensation in case of damage to property and electrical accidents;

6. Monitor the work related to Agriculture Pump Energisation and required infrastructure such as Substations, LT & HT lines etc;

7. To deal with matters of Energy Accounting and Distribution Transformers Energy Audit and Feeder Energy Audit;

8. To sanction emergency procurement of materials/ equipments and monitor the testing related work of the same;

9. To monitor the work related to the periodical testing of the all Substation, HT Consumer and EHV Consumer;

10. Allocation of funds for the purchase of materials on yearly basis;

11. To monitor the purchase and management of the material required for the various schemes;

12. To monitor the work related to the court cases regarding disputes (in terms of technical) with the various companies;

13. To monitor the work related to the Collection, Repatriation & Billing efficiency, Temporary and permanent disconnection of electrical supply, sanction all loads where voltage level corresponding to contract demand (as per SOP) is not maintained;

Finance 1. Supervising Finance & Accounts Section 2. Co-ordination with all offices in operational area 3. Maintenance of all statutory accounting/costing records as per applicable

laws 4. Annual /periodical finalization of accounts 5. Compliance with income tax, service tax, and other applicable laws as to

compilation, preparation and timely submission of various returns/documents to various authorities



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6. Preparation of annual/periodical budgets 7. Arranging for Corporate finance/ funding & related matters 8. Co- ordination with internal/external/CAG/Cost auditors 9. Ensuring overall compliance with internal audit/control systems 10. Liaison with banks, financial institutions and lenders and maintaining good

relations 11. Advising the management from time to time on modifications in MIS,

business performance, revenue enhancement, cost control, lowering finance costs, and other matters which are essential to keep the company in good financial health

Company Secretary

1. Company Secretary is responsible for addressing issues within External stakeholders/customers and internal processes and employees

2. Organise and oversee Company and Board Meetings and to ensure that the company in general is in compliance with its statutory requirements.

3. Responsible for Corporate Communications, formulate business oriented communication strategy, co-ordinate all media relations, Web Site Content, Web Site Updatation etc.

Human Resources Deptt.

1. To develop and implement progressive policies, procedures and plans relating to HR, and Staff development.

2. To formulate employment policy to guide the process of selecting human resources.

3. To develop a competitive reward system that will enable to attract and retain competent staff.

4. To identify labour relations issues within the Company and determine resolutions to deal with them where possible or recommend to Management for decision making.

5. To initiate, develop and supervise implementation of welfare and administrative systems and procedures in line with the HR manual.

6. To develop a performance management system that will enable the Company reduce production costs and improve performance standards.

7. To initiate and develop organizational development interventions to deal with the Copmany problems.



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3.7.9 Activities undertaken for HRD

3.7.9.1 Training The Human Resources being the most valuable asset the Company endeavors to provide an environment that each employee is motivated to contribute his/her best to achieve the Company’s Goals/Objectives. The Company has taken series of proactive HR initiatives including need based training and development programmes with special emphasis on developing competencies of employees and thereby enhancing organizational effectiveness. The Company has provided various training and development activities for its staff at GETRI (The Training Centre of GUVNL at Baroda), Power Stations and even at external places. Oracle database 10g administration workshop II training from 21.07.08 to 25.07.08 at GETRI for 18 participants of GUVNL and its subsidiary companies. 5 days Oracle training on “Building OA Framework Applications Ed 1.1. Training envisaged to provide an overview of the architecture of Oracle module with hands-on practice so as to enable the users to understand fundamental concepts and achieve self independence in operation.

3.7.9.2 Performance Appraisal Performance appraisals of Employees are necessary to understand each employee’s abilities, competencies and relative merit and worth for the organization. Performance appraisal rates the employees in terms of their performance. Performance appraisal is necessary to measure the performance of the employees and the organization to check the progress towards the desired goals and aims. The performance appraisal is done every calendar year. The company has category wise performance form for all its employees. The performance appraisal in the organization is done by confidential performance review system that is done by the reporting officer and reviewed by the reviewing officer. The performance is judged on several parameters and marked on a scale of five and accordingly promotions are done within the organization. In case of any adverse comment from immediate reporting authority, the Appraisee can appeal against it to the HR Deptt. and sort out the matter.



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3.7.9.3 Promotion

The promotions in the company are based on the Annual Performance Appraisal. The Company also follows the Seniority basis promotions. The seniority cum merit and merit cum seniority both the points are taken into consideration while promoting the Employee.

3.8 Corporate Social Responsibility

3.8.1 A step towards saving of Sarus

3.8.1.1 Sarus is a bird loved and respected traditionally by people of Gujarat. Sarus is one of the resident species of crane in subcontinent. From the total Sarus population of 8000 in India, 1600 are found in Gujarat. The present status of Sarus is vulnerable (IUCN Red data list). Its population is decreasing and this bird is on verge of extinction, unless some conservative measures are undertaken by all to save this people-loved bird. One of the threat for their death is also electrocution by high tension power line.

3.8.1.2 Gujarat is one of few states in the country where world population of Indian Sarus Crane is concentrated. In Dholka, Daskoi and Dehgam areas around Ahemdabad, more than 300 Sarus birds are found. On representation by wild life photographer and coordinator of Sarus Nature Conservation Society, regarding causalities of Sarus due to electrocution, UGVCL's decided to replace conventional wires by coated conductor to save the precious Sarus bird. The team of senior officials headed by the Managing Director Shri AK Verma (IFS) immediately decided to do all possible efforts for saving this endangered species and accorded sanctions to expend as a gesture of corporate social responsibility.

3.8.1.3 In all, a total of about 10 Km conductor is replaced with coated conductor at the cost of approximately Rs. 3.0 Lacs in the year 2009. As a part of its corporate social responsibility and as a part of ethical business practices, public image and sustainable development, UGVCL succeeded in reducing the casualties to Sarus Crane bird by its noble gesture.

Due to positive approach and purposeful monitoring and sincere efforts of line staff and Sub-Division Engineers, the task was accomplished and causalities were reduced from 24 (during 2008) to 2 (during 2009).



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3.9 Conservation of Energy

3.9.1 A large number of consumers are unaware of the potential of reducing energy consumption by using energy efficient devices. Bureau of Energy Efficiency has a rating programme for calibrating the energy efficiency of energy intensive appliances and Use of these appliances which carry higher star ratings, offers the possibility of reducing energy consumption in these applications. The full potential of demand reduction by use of energy efficient devices has not been realized partly on account of the higher cost of such star rated devices, although such higher cost would be off-set by the saving in energy cost in relatively short period of time. Although the efforts to promote the use of energy efficient devices through public awareness programmes could be continued, some of the measures needs to be initiated by utilities on its own. Some such measures which have been adopted in the past was to introduce compact fluorescent lamps (CFLs), increased awareness programmes for switching off the appliances completely instead of through remote devices etc. Some of the steps undertaken by UGVCL in relation to Conservation of Energy Measures are outlined below: Automatic Power Factor Controller (APFC) panels were procured and installed in

the system network for reducing the technical losses. APFCs are capable to switch ON and OFF the capacitors in stages and automatically maintain the designed factors. This will compassionate the reactive energy drawal from the LT side loading of the distribution transformer. Substantial energy can be saved by installation of APFCs.

High loss feeders have been identified, close monitoring is being done up to the Sub-division level to reduce the technical losses and meters are provided on TCs for better control on systems to identify the weak pockets with high losses.

Regular and periodic maintenance of line and equipments. Pamphlets explaining energy saving measures and its efficient use along with the

energy bills are circulated for public awareness. The seminar on energy conservation was also arranged with participation of all categories of consumers.

The company has procured and installed CFL and electronic ballast for energy saving in its own office premises and residential colonies.

Provided Amorphous Transformers in Urban, Industrial and Jyotigram feeders for technical loss reduction.

Considering the installation of ABFC panel on 11 KV feeders having low power factor whereby HT Line capacitor will be installed on feeders and LT fixed capacitor on transformer centre.

The stalls for Energy conservation tips, safety measures and micro dip irrigation



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campaign were provided during Ambaji Bhadarvi Mela and Unjha Mahotsav of Umiya Mataji.

Under the publicity campaign printing of pamphlets, posters, banners, telecasting of short films on TV, cable and on radio, advertisement in print media, depicting hoarding containing Energy Saving messages/slogans, etc was carried out during the celebration of “Energy Conservation Week”.

3.10 Activities related to Consumer Service

UGVCL have Customer care center for the booking online complain of the customer of the company. Four circles have 24 hour customer care center. All centers have contact numbers for booking complain on phone. Main Objectives of Customer Care Centre are:

o For better consumer services; o Minimizing the fault detection and rectification time by monitoring the

occurrence; o Improving performance of service by analyzing outage data and computing

reliability of network. It has following specialities:

• Single Window Complaint Management System • GIS Equipped • Computerized

Customer has not to wander from table to table for any query; he will get answers from single window only Person sitting at the Care Center can have the history of particular customer or of Particular Case on the clicks of the computer so he can straight forward, and confidently reply to the customer about the issue. In all 4 Circles, UGVCL has started Call Centres. Consumers have to dial 155333 and they get the 24X7 support on various issues.

3.11 Major Achievements of UGVCL

In past five years from the date of segregation of GEB, UGVCL has tried to perform individually based on the characteristics that were awarded due to unbundling.



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UGVCL has tried to overcome such stringent situation and has tried to conquer through their best efforts and dedication to bring overall efficiency in the system.

• Bronze Shield for 'Meritorious Performance in Electricity Distribution' during 2005-06 by Government of India

• Hi-Tech Meter Testing Laboratory at Sabarmati Circle accredited by National Accreditation Board for Testing and Calibration Laboratories (NABL) with ISO/IEC 17025:2005

• National Award for Excellence in Cost Management 2007 by ICWAI

• Accredited with ISO 9001:200 standard for Management and Performance Enhancement of Electricity Distribution Operations

• First Prize winner in the category of Excellent in Rural Electrification awarded by IEEMA Power Award 2008

• 2nd India Power Awards 2009 in recognition for overall utility performance in Agriculture Dominated Area

• Completion of Jyoti Gram Yojna, an ambitious project of Govt. of Gujarat

• Pioneer company of Special design Transformer

• ‘Good Performance Award’ – under the category of Public - Service Sector – Large for EXCELLENCE IN COST MANAGEMENT-2009 from ICWAI.

• 3rd India Power Awards 2010 under the category ‘Energy Efficiency, Conservation and DSM”



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4. Operational Performance Analysis

4.1 Background

4.1.1 This section elucidates the UGVCL overview of its business into operational and financial performance for the previous years. A comparative analysis of the operational performance for various years in relation to Sales, T&D Loss, Reliability indices, Collection Efficiency, etc is discussed here.

4.1.2 In spite of the fact that UGVCL is inherited with an old distribution infrastructure from the erstwhile GEB, GEB is making all out efforts to improve / sustain the performance as well as to supply quality power to the consumers.

4.2 Demand Supply situation in UGVCL

4.2.1 UGVCL was facing the power shortage during the morning peak hours and not able to supply quality power to all consumers resulted in to the load shedding. In order to provide quality power supply to all consumers for twenty four hours and eight hours continuous supply to agricultural sector, UGVCL decided to participate in the Jyotigram Yojana of Government of Gujarat.

4.2.2 In this scheme, agricultural pumpsets connections were separated from DLF

connection by constructing separate 11 KV feeders for agriculture pumpsets; UGVCL erected various HT and LT lines to separate Ag. Feeders; UGVCL divided all agricultural feeders in to different groups and started rearranging the power supply in order to obtain optimum load curve throughout the day; Resulted in to the flattening the load curve of UGVCL and avoided investment requirement of generation, transmission and distribution infrastructure;

4.2.3 From the following figure, it is clear that the UGVCL is facing very little deficit and

during the FY2009-10 it has 0 MW deficit.



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Figure 5: Demand Supply Situation in UGVL

4.3 Sale of Power

4.3.1 Currently, UGVCL is serving approximately 26 Lacs of consumers of which around 76% of the consumers are residential consumers. The factors affecting the actual consumption of electrical energy are numerous and often beyond the control of the licensees (policy, economy, individual consumer’s conditions, recession, etc.) or even the consumers (weather, variations in demand-supply conditions of the consumer’s product, etc.).

4.3.2 The following figure shows the category wise sales from the FY06 to FY10. The

residential category has shown a growth with 10% CAGR over the period FY06 to FY10. The commercial category has shown a healthy growth rate of 15% whereas the Industrial (HT) has shown the highest growth of ~17% over the period FY06 to FY10.

Table 1: Sales Growth Rate

Sales (MU) 5 years CAGR

FY 10 over FY06

Low Tension Consumers Residential 10.09% Commercial 15.25% Industrial LT 5.08% Public Water Works 6.73%



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Sales (MU) 5 years CAGR

FY 10 over FY06

Agriculture 5.47% Street Light 5.22% LT Total 6.33% High Tension Consumers Industrial HT 16.99% Railway Traction 2.20% HT Total 16.90%

TOTAL 8.36%

Figure 6: Category wise Sale of Power (MUs)

4.3.3 The agriculture consumption although reducing significantly but remains the highest (~55% in FY10) and that too mostly (~46%) unmetered which is a cause of concern. The next highest consumption is of Industrial HT Category which was about ~25% during FY10.It is noted that though around 76% of the consumers of UGVCL are from Residential category, the consumption is only to the extent of 9% as the supply area of UGVCL is agriculture dominated region with low water level table and therefore more dependence on agricultural pump set to carry out the agricultural activity.



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Gujarat is one of the most industrialised states in the country, whereby major economic development activities are carried out by the State Government, due to which UGVCL is experiencing a surge in the demand of industrial power. Gujarat contributes 15.59% of the total value added by the manufacturing sector in the country. Therefore, the demand for electricity from the industrial category is also increasing.

Figure 7: Category Wise Sales (%)

4.3.4 UGVCL is feeding electricity to 6 agriculture dominant Districts of Gujarat. These 6 districts all together (excluding Bhuj) account for around 27% of the net sown area of Gujarat. Except Ahmedabad, all the districts depend on well for their irrigation purposes indicating high dependence on electricity.

4.3.5 This region, though, has multi-aquifer system, with prolific yields but the excessive

groundwater pumping over last many years has resulted in de-watering of a substantial part of aquifer and reduction in pressure heads. The overexploitation of



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groundwater has resulted in conspicuous decline in water levels seriously affecting agriculture production in this part of the state. The detrimental effects of over exploitation of groundwater i.e., decline in water levels have added to the energy bill.

4.4 Distribution Losses

4.4.1 The following figure shows the distribution loss trajectory over the 4 year period FY07 to FY10. The increase in the loss during FY09-10 is due to the increase in loss in unmetered agriculture consumption.

Figure 8: Trend in Distribution Losses

4.4.2 Considering the national average of 30%, T&D losses in India, 17% Distribution losses is an achievement. If the 8 hour power supply to agriculture is considered, the distribution losses come to 13.69% which is quite low.

4.4.3 Following activities are planned to reduce losses.

• Technical Loss reduction Activities are planned as under: o Proper maintenance & replacement of conductor & cables with proper size. o Providing amorphous transformers & balancing load on each phase along

with bringing transformer in load centre. o Providing proper earthing to HT poles and transformers & minimize current

on neutral of transformers. o Improving power factor of feeder by HT capacitor. o Improving power factor of feeder by APFC panels & LT capacitors.



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o Bifurcating all required feeders along with review of allowable norms of bifurcation for AG feeders & minimize all joints in lines etc.

• Commercial Loss reduction Activities are planned as under: o Energy audit of DTC losses considering commercial/theft parameters. o Providing Arial bunch conductor/insulated conductor/XLPE cable & armoured

services. o Replacing services having joints, provide meters outside the entrance of

premises. o Replacing meters by static meters. o Replacing all faulty/burnt meters & making all installation pilferage proof. o Providing XLPE coated conductor at all crossing of rural feeders etc

• Other Activities o Performance based incentive scheme is finalised & is in operational. o DTC wise micro analysis for energy audit. o Energy efficient pump-set scheme (EEPS) which is started in few talukas. o Franchise for high loss making pockets & high loss feeders are planned. o Through CMS (Consumer monitoring system) Consumer wise rise in

consumption is being studied. o Utilization of advanced technology & up gradation. o Planned Checking based on CMS study & identification of theft prone areas.



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4.5 Consumer base

4.5.1 Given below is a graph depicting the number of consumers across different categories for the year 2005-06 to 2009-10. The majority of the consumers are in the residential category followed by the commercial one.

Figure 9: Consumer Base

4.6 Operating Indices

4.6.1 As per the GERC (Standard of Performance of Distribution Licensee) Regulations, issued by the Hon’ble Commission on 31st March 2005, it has been directed that UGVCL shall calculate the reliability of his distribution system on the basis of number and duration of sustained interruptions in a year, using the following indices:-

i) System Average Interruption Frequency Index (SAIFI);

ii) System Average Interruption Duration Index (SAIDI); and

iii) Momentary Average Interruption Frequency Index (MAIFI)

Table 2: Reliability Indices of UGVCL

Reliability Indices FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10

SAIFI 17.05 15.86 14.03 12.98 9.08

SAIDI (Hrs: Min: Sec per Year)

27:29:00 34:36:00 24:38:00 16:30:00 14:45:24

MAIFI 201.24 148.14 142.21 118.71 92.50



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4.6.2 System Average Interruption Frequency Index (SAIFI) is the average number of times that a consumer is interrupted during a specified time period. It is determined by dividing the total number of consumers interrupted in a time period by the average number of consumers served. The resulting unit is "interruptions per consumer". As seen in the above table, the interruptions per consumers have been drastically reduced over the last five years.

4.6.3 System Average Interruption Duration Index (SAIDI) measures the average duration of interruptions for the average consumer. It is the ratio of the annual number of interruptions to the number of consumers. As seen in the above table, the duration of interruptions per consumers have been drastically reduced over the last five years.

4.6.4 Momentary Average Interruption event Frequency Index (MAIFI) measures the average momentary interruption events per consumer. It is the ratio of the annual number of momentary interruptions to the number of consumers. As seen in the above table, the duration of interruptions per consumers have been drastically reduced over the last five years.

4.7 Power Purchase

4.7.1 The following table shows the per unit rate of power purchase for UGVCL during the last 5 years. As can be seen from the figure, per unit rate is increased significantly largely due to the increase in fuel costs. In 2008-09, sharp rise is due to increase in gas price. UGVCL has around 7% of gas based capacity allocation.

Table 3: Power Purchase Expenses for the past 5 Years

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10 Units Purchased (MUs) 12,130 11,985 13,001 13525 15647

Value (Rs Crs) 2217 2502 2931 3720 3987

Per Unit Cost 1.83 2.09 2.25 2.75 2.55

4.8 Transformer Failure Rate

4.8.1 The distribution transformers failure rate is still high. Efforts should be made to bring down the transformer failures to less than 10%. For reduction in failure rate of distribution transformers, the company has taken various remedial measures which are as under.



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• Balancing of load of transformers and to shift transformers in the load center.

• Effective pre and post monsoon maintenance work.

• Providing Amorphous transformers against failed CRGO transformer in Urban/JGY feeders which will not only reduce losses but also help to reduce transformer failure.

• Up graded condition in repairing order for improving quality of repaired transformers are planned.

• In a phased manner old (above 15 years or technically un economical) transformers are being replaced, looking to availability of fresh transformers.

Table 4: Transformer Failure Rate

Particulars 2006-07 2007-08 2008-09 2009-10*

Transformer Failure Rate 14.75% 12.62% 10.07% 8.04% *Upto Dec.’09

4.9 Employee Rationalisation

The total number of employees in UGVCL was 6943.

Table 5: Details of Employees

Class /Cadre Technical Non Technical

Class-I 268 25

Class-II 361 65

Class-III 767 2395

Class-IV 2646 416

Total 4042 2901

Net Total 6943

The following figure show the employee expenses per unit power sold for various Discoms in India. Compared to other Discoms in Gujarat as well as some of the Discoms from other states, the employee expenses for UGVCL are on slightly lower side which is a good sign. The costs for other Discoms are the approved numbers by the respective Commissions from their Tariff Orders.



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Figure 10: Employee Expense/Units Sold (Rs /Unit Sold)

4.10 Support from GoG

4.10.1 Government of Gujarat (GoG) is supporting the Discoms through Subsidies towards Cost of Capital Assets Grants for Capital Assets Capital Grants under FRP Energy Conservation grant for Energy Efficient Pump Sets. Also the GoG provides the agricultural subsidy to the four Discoms i.e. DGVCL, PGVCL, UGVCL and MGVCL in proportion to their respective percentage share in agricultural consumption to compensate the tariff difference as well as unmetered consumption.

Table 6: Agriculture Subsidy for the Last 5 Years

Rs Crs 2005-06 2006-07 2007-08 2008-09 2009-10 Agriculture Subsidy 566.72 570.23 576.59 571.29 578.68

4.11 Revenue Realized from sale of Power Vs Average Cost of supply

4.11.1 The figure given below shows the revenue realized per unit of electricity sold (excluding government grant & subsidies & revenue from other income) in comparison with the average cost of supply for the last 5 years.



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Figure 11: Revenue Realised Vs Cost of Supply (Rs / Unit)

4.11.2 The revenue realised is closer to cost of supply due to optimisation of power purchase costs, overall improvement in operational efficiency, savings in interest costs and significant improvement in cash collections.

4.12 Demand Side Management Initiatives by UGVCL

4.12.1 The details of action taken for “DSM” during the Year-2010-11 are briefed hereunder:

• Load Management:-

After implementation of Intra- State ABT as per the Hon’ble Commission Order, UGVCL has taken the following remedial measures to reduce the morning & evening peak demand to make the load curve as far as flat by regrouping of existing Ag. Groups and rescheduling of time.

a) o Regrouping of Ag. Groups were made from 36 to 59 Nos. to reduce the

morning & evening peak demand to avoid the UI charges against over drawl.

ALDC ( LMU )

o To make the load curve as far as flat, the time schedule of all Ag. Groups are changed. The average Demand range of Maximum to Minimum of 2150 / 900



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MW in the Year 2006-07 is reduced to 1800 / 1450 MW i.e. band is reduced from 1250 to 350 MW by rearranging Agricultural load.

o It is also helpful to reduce the power purchase cost by drawing more power at high frequency of system by again shifting the groups during the high frequency zone.

b) o Under “ Action Plan for Energy Conservation for various financial year ” by

GUVNL, the total 3860 Nos. of APFC Panels were provided on various Ag/ Ind / Urban feeders having low PF during the Year- 2007-08 & 2008-09. Under “Action Plan of Energy Conservation” declared by the GUVNL for the Year-2007-08, total 6100 Nos. of CFLs having different rating and 5000 Nos. Electronic Ballasts were purchased and same were provided in various premises of UGVCL Offices.

APFC Panel and CFL & Ballast

o GUVNL has not declared any “Action Plan for Energy Conservation for FY- 2009-10 and 2010-11” with specific budget provision for improvement of Power Factor, hence, the work of providing APFC Panels/ CFLs were not carried out.

o However, the UGVCL has asked the data from GETCO regarding low PF feeders on the basis of Average PF (Yearly KWH / Yearly KVAH) vide letter dtd. 05.08.10 and said details are not received so far. On the receipt of said data, the matter will be decided accordingly looking to budget provision made.

c) o Govt. of India had launched the Bachat Lamp Yojana for proposed CDM

Project with specific terms & condition. Also, BEE is being monitored entire activities in consulatation with the concerned Utility. Hence, the UGVCL has decided to implement the Bachat Lamp Yojana and put up EoI on website & published notice for providing CFLs under BLY Yojana for various lighting consumers of UGVCL. The matter is under process and further action will be taken as per procedure.

Bachat Lamp Yojana ( BLY ) OF GoI



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d)

Mass Awareness of the Consumers

o To create the concept of energy conservation amongst the Consumers, every year farmer Camp & Stalls regarding tips of energy conservation provided during Bhadarvi Poonam were arranged for utilization of energy efficient appratus. During the Year-2010-11 and occasion of celebration of “Swarnim Gujarat”, the competition of painting & debate of school children were arranged on themes of Energy Conservation during Urja Shakti Month- Aug-2010. Also, Rally’s were arranged at Corporate and Circle level during Aug-2010 for creation of concept of energy conservation and safety measures amongst the consumers. Also, during the Bhadarvi Poonam Mela, total 3 Nos. of Stalls were provided on the route of Padyatri & usefull information was provided on tips of energy conservation.

o During the FY- 2010-11, the GUVNL has made provision of 60 Lakhs under head of IEC for mass awareness of the consumers and further activities for the same will be carried out during the celebration of Energy Conservation Week.

e) o The GOG has introduced the Scheme for replacement of old inefficient

pump sets by Energy Efficient Pump Sets (EEPS) in some selected area of Gujarat as a pilot project.

Energy Conservation by Implementation of Govt. EEPS Yojana

o The scheme is launched by GOG with a motto to reduce power consumption and to reduce peak demand in agriculture sector. The scheme applicable to Flat Rate Tariff based (un-metered) consumers only. As per scheme, from total cost of new pump set supplied,

− 1/3rd cost is to be borne by the consumer,

− 1/3rd cost to be borne by UGVCL and

− Balance 1/3rd cost to be borne by GOG as a subsidy.

o Gujarat Energy Development Agency (GEDA) has approved 29 different manufacturers for supply of energy efficient pump sets as per Technical Specifications, provided with scheme and consumer has option to select desired pumps from approved manufacturer for purchase of new pump set.



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f) o As per GOG scheme, pilot project is first implemented in nine talukas in

UGVCL jurisdiction. UGVCL had accepted the challenges for implementation of pilot project with existing field staff setup. Efforts had been made by company to bring awareness of the scheme among agriculture consumers by arranging “Kisan Camp”, distribution of leaflets in different gatherings, advertisement in local news papers for wide publicity of the scheme etc.

Implementation of Pilot Project

o As per Scheme, UGVCL has responded actively and replaced 12929 of old pumpsets of agriculture fixed tariff consumers by Energy Efficient Pump Sets by verification of pumpset load before and after replacement in just period of one year.

g) Table 7: Achievement of DSM Scheme

Achievement of scheme

Allocation of fund for 2009-10

(1/3rd Govt. & 1/3rd of Govt.)

: 37.57Cr+37.57Cr=

75.14 Cr.

EEPS Installations (Physical) : 12929Nos

Energy Saving (HP) : 103071

% saving in HP on connected load : 15.69%

Projected MUs saved : 175.22 MUs

Total saving in amount : 56.52 Crores

Pay Back Period of entire scheme : 2.10 years.

h) o Cost benefit of the 2/3rd amount of EEPS, as it is subsidies to the consumer.

Benefit of the scheme

o 15.69% saving in HP is obtained under ongoing scheme up to MAR-2010.

o Consumer can avail benefit of reduction of load this in turn saving in payment of energy charges.

o Consumers have 1 year guarantee and 3 years warranty covered pump set i.e. expenditure of maintenance is almost nil for next 4 years

o Awareness amongst the consumers by using EEPS for importance of energy efficient use of electricity in daily use



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o Old in-efficient pump sets have been credited to Stores of the company & sold through e-auction with segregation of metal parts to avoid re-use of same pump.

i) o While reviewing the performance, problems and progress of the

implementation of EEPS Scheme, it was decided in the meeting of 28-01-2010 to fully check the pumps installed till then and make observation regarding EEPS of various makes and models.

Barriers of the scheme

o At present the scheme is on hold during FY 2010-11 due to investigation is going on by UGVCL to resolve implementation errors and implement as per guide lines as suggested by IRMA, Anand. Regarding issues PS, EPD Govt. of Gujarat as well as GEDA are informed.

j) o To reduce theoretical losses as well as to prevent theft of energy, HVDS

System is very helpful. Also it makes quality power supply available to Consumers. As per “Golden Goals” for the Year-2008-09, total 5000 Nos. T/Cs were to be converted in to HVDS System. Against which on 5657 Nos. of T/Cs, HVDS has been applied. In year 2009-10 total 1343 nos. of T/Cs provided.

HVDS

o In the year 2010-11 1504 nos. of T/c is planned to provide & its budgetary provision is made by GUVNL amounting to Rs. 868 Lacs. Planning is again revised during July’10 for existing network & planning for remaining month was set to provide 542 Nos. of T/c provided & budgetary provision 813.7 Lacs.

k) o Amorphous by name means stack of symmetrical structure or form.

Amorphous metal manufacturing process includes rapidly cooling the modern metal at 106 Celsius per second solidifying into ribbon or step in one step process. This prevents crystallization of metal. Hence there will not be any grain boundaries to impede the magnetic domain moment, a feature that drastically decreases the hysteresis loss.

Providing Amorphous Transformer :-

o To reduce technical losses in urban and semi urban area it is desirable to replace CRGO transformer by amorphous transformers because their no load



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losses are less as compared to CRGO transformers. The lighting load is having its peak load during 6 AM to 9 AM in the morning and 6 PM to 9.30 PM in the evening. For remaining hours, there is comparatively low utilization of electricity in rural area. After implementation of JGY Scheme, all the lighting consumer are getting 24 hours three phase power supply including villages. Status of installation of Amorphous transformers is as below:

Table 8: Details of installation of Amorphous Transformers Scheme

Total Nos of DTs : 1,16,971 Nos

DTs on Urban/Jyotigram/Ind./GIDC Feeders : 26001 Nos

Amorphous Transformers Installed : 18077 Nos.

Pay Back Period : 6.65 Years

Estimated Annual saving : Rs 3.82 Cr

Balance to be provided 7924 Nos

o Details of Amorphous Transformer provided upto Aug’10 during the year 2010-11 is as under.

Table 9: Status of Amorphous Transformers upto August 2010.

Name of Circle : Amorphous Transformer

(2010-11 Up to Aug-10)

Mehsana : 428

Sabarmati : 1649

Palanpur : 328

Himmatnagar : 454

Total : 2859

l) o Technical losses mainly depend on Ampere loading and conductor resistance.

Ampere load of line should be reduced by separating line load (feeder

Feeder Bifurcation Work



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bifurcation) or lowering line resistance by raising conductor size (conversion of line conductor).

o UGVCL is carrying out feeder bifurcation work under system improvement scheme for improvement of reliability and quality of power supply. Due to feeder bifurcation, consumer end voltage profile is improved. Distribution utility has advantage of reduction in losses and less time to rectify feeder faults.

o As per general practice in UGVCL, feeder bifurcation is proposed if load of feeder crosses 150 Amp at S/S end under SI scheme.

m) o As per analysis of distribution losses for 99 Nos of feeders, for which

bifurcation work completed during 2007-08, results are as under:

Results

Table 10: Result of Feeder Bifurcation Work

Losses before bifurcation : 30.80 %

Losses after bifurcation : 24.09 %

Annual Saving in MUs loss : 60.90 MUs

Total Saving at Rs 3.00 per Unit : Rs. 1827.14 Lac

Total Investment for bifurcation : Rs 1325.32 Lac

Pay Back Period : 9 Months

o Annual saving of 60.90 MUs is equivalent to @10 MW additional generation capacities. With investment of Rs 13.25 Cr for feeder bifurcation, new investment of about Rs.50 Cr for generation addition is reduced which also reduces pollution.

o Two feeders have been upgraded from 11 KV Rabbit conductor to 11 KV DOG conductor resulted in to saving of Rs 17 Lac per annum and 0.84 MUs per annum.

o UGVCL is generally carrying out feeder bifurcation of @150 Nos of feeders every year under system improvement scheme. In the year 2008-09, 3.5 % T&D loss reduction observed in which 208 Nos of feeder bifurcation played vital role.



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o Details of feeder bifurcation upto Aug’10 for year 2010-11 is as under.

Table 11: Details of Feeder Bifurcation work

Circle Feeder Bifurcation

(2010-11 Up to Aug-10)

Mehsana : 17

Sabarmati : 24

Palanpur : 25

Himmatnagar : 14

n) o Phase balancing on distribution transformer is carried out which reduces the

floating current on neutral of transformer & reduces the transformer loss which ultimately reduces the failure of transformer.

Load Balancing of Transformer :-

Table 12: Details of Load Balancing Transformer

Name of Circle

Population of Non Ag. Consumer 2010-11

Load Balancing Done

(Up to Aug-10)

Mehsana : 7171 300

Sabarmati : 10315 1912

Palanpur : 6270 3840

Himmatnagar : 6315 1132

Total : 30071 7184



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5. Financial Performance

In this section, the financial statement of UGVCL have been reviewed and evaluated to understand the financial health of the company and enabling more effective decision making.

5.1 Revenue Statement Analysis

The following table shows the Profit and Loss statements of UGVCL for the last 5 years.

Table 13: Profit & Loss Account for Last 5 Years

Particulars Year ended March

31 2006 Year ended

March 31 2007 Year ended



March 31 2010 % Change over FY 09

CAGR

[` In Crs] % [` In Crs] % [` In Crs] % [` In Crs] % [` In Crs] % FY06 to FY10 INCOME

Sale of Power 1,921 74.83% 2,241 75.34% 2,557 76.05% 3,589 84.12% 3,880 85.26% 8% 19% Revenue Subsidies 576 22.44% 595 19.99% 577 17.15% 571 13.39% 579 12.72% 1% 0% Other Income 70 2.73% 139 4.67% 229 6.80% 106 2.49% 92 2.03% -13% 7%

TOTAL 2,567 100.00% 2,975 100.00% 3,362 100.00% 4,267 100.00% 4,551 100.00% 7% 15% EXPENDITURE

Purchase of Power 2,217 86.37% 2,502 84.10% 2,931 87.18% 3,720 87.19% 3,987 87.62% 7% 16% Repairs and Maintenance Exps. 41 1.59% 44 1.49% 76 2.26% 53 1.25% 51 1.13% -4% 6% Employees Costs 94 3.64% 203 6.84% 187 5.57% 258 6.05% 271 5.96% 5% 30% Administrative and General

Expenses 20 0.77% 22 0.72% 29 0.87% 35 0.82% 37 0.82% 6% 17%

Depreciation 68 2.64% 78 2.61% 89 2.66% 101 2.38% 113 2.47% 11% 14% Interest and Finance Charges 116 4.53% 106 3.55% 90 2.67% 119 2.78% 119 2.61% 0% 1% Bad debts & Other debits 2 0.09% 5 0.17% 1 0.04% 16 0.37% 8 0.19% -47% 37% Extra Ordinary Items - 0.00% 0 0.01% - 0.00% - 0.00% - 0.00%



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Particulars Year ended March

31 2006 Year ended




March 31 2010 % Change over FY 09

CAGR

[` In Crs] % [` In Crs] % [` In Crs] % [` In Crs] % [` In Crs] % FY06 to FY10 Sub-Total 2,558 99.63% 2,960 99.50% 3,404 101.24% 4,303 100.83% 4,587 100.79% 7% 16%

Less: Other Expenses Capitalised - 0.00% - 0.00% 51 1.51% 47 1.11% 43 0.95% -8%

Extra-Ordinary items - 0.00% - 0.00% 0 0.01% 0 0.01% 1 0.02%

Net Prior Period Credit / (Charges) - 0.00% 5 0.17% (7) -0.20% (4) -0.09% 1 0.01% -114%

TOTAL 2,558 99.63% 2,955 99.32% 3,360 99.94% 4,260 99.82% 4,544 99.85% 7% 15% PROFIT /(LOSS) BEFORE TAX 9 0.37% 20 0.68% 2 0.06% 7 0.18% 7 0.15% -7% -7%

Provision for Taxes

Income Tax 0 0.01% 2 0.07% 0 0.00% 1 0.02% 1 0.03%

Fringe Benefit Tax 1 0.04% 1 0.02% 1 0.02% 1 0.02% - 0.00%

Wealth Tax - 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%

Deferred Tax Liability 7 0.26% - 0.00% - 0.00% - 0.00% - 0.00%

Total 7.90 0.31% 2.91 0.10% 0.99 0.03% 1.54 0.04% 1.28 0.03% -16% -36% PROFIT /(LOSS) AFTER TAX 1.56 0.06% 17.17 0.58% 0.86 0.03% 5.95 0.14% 5.65 0.12% -5% 38% Profit /Loss for the current year 1.56 0.06% 17.17 0.58% 0.86 0.03% 5.95 0.14% 5.65 0.12% -5% 38% Units Sold (MUs) 8,857

9,590

10240

10910

12213

12% 8%

Revenue per Unit 2.90

3.10

3.28

3.91

3.73

-5% 6% Average Cost of Supply 2.89

3.08

3.28

3.90

3.72

-5% 7%

Uncovered Cost per Unit 0.01

0.02

0.00

0.01

0.01



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5.1.1 Sale of Power

• The revenue from retail consumers (sale of power from Licensed Area) for FY 2009-10 is Rs. 3,880 Crores as compared to Rs. 3,589 Crores in FY 2008-09. The revenue earned in FY 2009-10 has seen a growth of 8% in comparison to the previous year.

• Due to Industrial development of region and increase in the demand from the industrial as well as commercial consumers, the demand has witnessed a growth of 9% CAGR in last 5 year period from FY06 to FY10. Due to such growth in demand in power and the increase in tariff due to regulatory regime and pass through of many cost, the revenue from sale of power has witnessed a growth of ~ 19% CAGR.

• The major increase in sales was in FY09 of ~40% as the demand was witnessing a boost due to recovery phase from the global recession period faced by all the major countries in the world.

5.1.2 Total Revenue

• The total revenue consists of revenue from distribution of power, revenue subsidies and other income. The total income has seen a growth of 7% over FY2008-09 while a CAGR of 15% can be seen over the period from FY06 to FY10.

• Revenue Subsidies are accounted for as allocated by GUVNL (Holding Company) and credited to profit & Loss Account. Revenue subsidies have been almost constant throughout the period from FY06 to FY10. The revenue subsidies is usually provided by Government of Gujarat which was around 22% of the sales in FY 06 and gradually have come down to ~13% of total sales. This shows that UGVCL dependence on the subsidy from GoG has gradually been decreasing due to healthy financial position and effective operational management.

• Income from Sale of Scrap and Insurance claims are accounted for on the Basis of actual realization. Amount in respect of delayed Payment charges (Except for cases where suit is filed in the court) is accounted on the basis of actual realization of late payment against outstanding energy bills. The other income has seen a decline of 13% over last year whereas it has grown by a CAGR of 15% over the period FY06 to FY10.

5.1.3 Purchase of Power

• As common to all the distribution utility, Power Purchases expenses has the



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major proportion in the total cost of the UGVCL. It almost contribute around 85% to 88% of the total income earned incurred by UGVCL.

• The power purchase cost has increased at a CAGR of 16% in last 5 years. The increase in the Power purchase cost is more or less in proportion to the increase in the total revenue which is around 19% which has offset the major impact of the Revenue hike in the profit and loss statement. The market rate of power in last year has witnessed a major increase in cost per unit which is in the range from Rs. 5 per unit to Rs. 12 per unit on short term procurement basis.

• The power purchase cost has increased almost by 16% in last 4 years due to increase in demand and the purchase of power from the open market at available cost to meet the demand supply gap for the state and mitigate the load shedding. However, the procurement of power is undertaken by GUVNL, the allocation of power is as per the demand of the region vis-a-vis availability in the market. GUVNL is considered to be one of the best utility to have a proper power procurement plan with least cost impact on the DISCOMs.

5.1.4 Operation and Maintenance Expenses

• O&M expense is the second prime expenses after power purchase cost. The O&M expense accounts for about 6% to 9% of the total income earned by UGVCL.

• The proportion of Repair & Maintenance expenses and Administrative & General Expenses is only about 2% of the total income earned whereas 4% to 6% is towards employee expenses.

• The O&M Cost has also witnessed a growth of 54% in last 4 years and a sudden hike of 19% for FY 2008-09 as compared to the previous year due to 40% increase in Employee cost against the revision in 6th Pay Commission recommendations. Also, R&M expenses are decreasing from FY 2007-08 due to efficient management of distribution infrastructure system.

• The increase in A&G costs are due to the increase in fees and subscription charges, Expenses on Computer Billing & EDP Charges, security expenses.

• The major reason for the increase in O&M cost is the Employee Costs. The employee cost has increased with a CAGR of 30% over the last 5 years due to revisions in pay as per 6th pay Commission recommendations.



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5.1.5 Depreciation

• Depreciation as an expenses are around 3% of the total income.

• The company has changed the policy of providing Depreciation from charging depreciation from next quarter to the date of commissioning of assets w.e.f. 01-04-2009. Due this the profit for the FY 2009-10 is impacted by 0.45 Crs.

• The depreciation has been increasing from FY 2008-09 due to the commissioning of major renovation and modernization expenses carried out by UGVCL.

5.1.6 Interest and Finance Charges

• Though in the initial years, the interest expenses used to be around ~5% of the total expenditure, in the FY 2009-10, it has reduced to ~3% of the total expenditure. The reasons behind this could be significant reduction in state government loans, interest on Bonds, on REC Loans and deferred payment credit.

• Interest and finance charges have been same for the past 2 years.

5.1.7 Profit before Tax

• Though, the cost of supply in comparison with the total income of UGVCL, the difference is offset by way of subsidy and other income. Therefore, average rate of realisation per unit is higher than average cost of supply per unit (by almost 1 paise per unit).

• The profit before tax has not seen any change and remained at Rs 7 Crs for the last 2 years even though the bad debt and other debits have reduces by~50%.

• However, in the FY 2006-07, the profit was around Rs. 20 Crores which was around 0.68% of the total income.

5.1.8 Profit after Tax

• The profit after tax has reduced by about 5% in FY 2009-10 as compared to previous year. As discussed earlier, UGVCL has changed the policy of providing Depreciation from charging depreciation from next quarter to the date of commissioning of assets w.e.f. 1-04-2009. Due this the profit for the year2009-10 is impacted by 0.45 Crs.



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5.2 Balance Sheet Analysis

The following table shows the Balance Sheet of UGVCL for the last 5 years.

Table 14: Balance Sheet of last five years

Particulars Year ended






March 31 2010 CAGR

In Crs % In Crs % In Crs % In Crs % In Crs % % Change FY06-FY10 SOURCES OF FUNDS

SHAREHOLDERS FUND 538 39.65% 683 44.57% 713 44.32% 965 50.95% 1,047 59.52% 8% 18% Share Capital 0 0.00% 0 0.00% 0 0.00% 207 10.94% 207 11.78% 0% 702% Share Application Money 444 32.68% 444 28.97% 444 27.56% 30 1.58% 30 1.71% 0% -49% Reserves & Surplus 95 6.97% 239 15.60% - 0.00% 358 18.92% 364 20.69% 2% 40% Deferred Government Grants, Subsidies & Contributions

- 0.00% - 0.00% 270 16.76% 369 19.51% 446 25.34% 21%

LOAN FUNDS 819 60.35% 849 55.43% 896 55.68% 929 49.05% 712 40.48% Secured Loans 349 25.74% 382 24.94% 455 28.30% 438 23.14% 307 17.44% -30% -3% Unsecured Loans 463 34.11% 467 30.49% 441 27.38% 490 25.90% 405 23.05% -17% -3% Deferred Tax Liability 7 0.50% - 0.00% - 0.00% - 0.00% - 0.00% -100%

TOTAL 1,357 100.00% 1,531 100.00% 1,609 100.00% 1,893 100.00% 1,759 100.00% -7% 7%

APPLICATION OF FUNDS FIXED ASSETS Gross Block 1,587 116.89% 1,799 117.47% 2,043 126.97% 2,267 119.75% 2,482 141.15% 9% 12% Less: Accumulated Depreciation. 271 19.95% 347 22.67% 436 27.11% 536 28.32% 646 36.76% 21% 24% Net Block (a) 1,316 96.94% 1,452 94.80% 1,607 99.86% 1,731 91.44% 1,836 104.39% 6% 9% Add : Assets not in Use 0 0.00% 0 0.01% 1 0.06% 0 0.01% 0 0.02% 82%



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Particulars Year ended






March 31 2010 CAGR

In Crs % In Crs % In Crs % In Crs % In Crs % % Change FY06-FY10 Capital Works in progress 6 0.44% 7 0.43% 9 0.56% 10 0.51% 15 0.83% 51% 25% (b) 6 0.45% 7 0.43% 10 0.63% 10 0.53% 15 0.85% 50% 25% NET FIXED ASSETS (a)+(b) 1,322 97.39% 1,458 95.24% 1,617 100.49% 1,741 91.96% 1,851 105.24% 6% 9% INVESTMENTS CURRENT ASSETS, LOANS & ADVANCES Inventories, Stores & Spares 88 6.49% 103 6.75% 175 10.86% 168 8.85% 196 11.15% 17% 22% Sundry Debtors 350 25.82% 355 23.19% 432 26.83% 491 25.95% 532 30.27% 8% 11% Cash & bank balances 83 6.12% 25 1.66% 32 2.02% 37 1.96% 65 3.70% 76% -6% Loans & Advances 11 0.79% 9 0.59% 16 0.97% 26 1.36% 22 1.27% -14% 20% Other current assets. 35 2.60% 362 23.63% 244 15.16% 431 22.78% 149 8.46% -66% 43% TOTAL CURRENT ASSETS 568 41.82% 855 55.82% 899 55.84% 1,153 60.90% 964 54.85% -16% 14% Less: Current Liabilities 251 18.51% 396 25.84% 906 56.32% 920 48.60% 984 55.94% 7% 41% Provisions 283 20.82% 386 25.22% - 0.00% 81 4.30% 92 5.25% 13% -24% TOTAL 534 39.32% 782 51.06% 906 56.32% 1,002 52.91% 1,076 61.19% 7% 19% NET CURRENT ASSETS 34 2.49% 73 4.76% (8) -0.49% 151 8.00% (112) -6.35% -174% -35% Miscellaneous Expenditure 2 0.12% - 0.00% - 0.00% 1 0.04% 19 1.10% 85%

TOTAL 1,357 100.00% 1,531 100.00% 1,609 100.00% 1,893 100.00% 1,759 100.00% -7% 7%


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5.2.1 Fixed assets and Capital under Construction

• In last 5 years, Net Fixed Assets have grown at a CAGR of 9% due to the augmentation of distribution system carried out by UGVCL to cater the load growth in the area to improve the quality of power supply. The major expansion of fixed assets plan was carried out from FY 2008-09 by UGVCL due to which still there is a pipeline of CWIP and witnessing a CAGR of around 25% in last 4 years.

• The CAPEX plan undertaken includes re-enforcement of the system to provide quality, security and availability of power supply to the consumers, to undertake system development to meet the load growth, achieving the targeted reduction in system losses, undertake automation and other improvement works to enhance customer service.

• Some of the distribution schemes that are in progress in UGVCL are Kutir Jyoti, Jyotigram, Nirmal Gujarat. Automatic p.f. control panel. Other new schemes include Arial bunch conductor/ underground cables, Automatic meter reading, GIS. Automation & computerization etc.

5.2.2 Net Current Assets

• A CAGR of the Net Current Assets or the requirement of the working capital is around 35% which is due to the expansion in the operation of the business, low credit period available for payment against the power purchase, increase in the O&M cost, etc.

• The Net Current Assets have been negative in FY 2009-10 due to decrease in other current assets comprises of Income accrued but not due, Amt. recoverable from emp./ ex-employees, Interest Accrued & Due on Staff Loans & Advances. Receivables from Government - Primary School, Other Misc. Receivable from Govt Dept, Local Bodies, Deposits, Other receivables from Associate Companies including GSECL, other Discoms, GETCO, GUVNL and GETRI. Also, current liabilities are witnessing a CAGR of around 41% affecting the working capital requirement.

• The major portion in the current assets is the Sundry debtors (receivables against supply of power) which have almost been around 50% of the Total Current Assets and around 25% to 30% of Total Assets. Though the Sundry debtors are witnessing a CAGR of around 11%, UGVCL has been able to control the default in collection due to efficient collection management and have a collection efficiency of around 100%.

• Against that the current liabilities has also increased to a large extent with a


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CAGR of around 41%. The increase in Current liabilities in compare to FY 2008-09 is 7% for the FY 2009-10. The proportion of Current Liabilities of Total Assets have increase from 19% to 56% due to increase in the security deposit from consumers due to economic development and increase in demand, Creditors for Power Purchase due to costly power purchase for mitigating load shedding, Creditors for O&M expenses due to major renovation and modernisation drive carried out by UGVCL.

5.2.3 Equity in line with Debt

• To carry out the capacity expansion plant, Equity of the company has increased subsequently.

• Due to such expansion plans, a Consumer contributions / grants / subsidies increased by 28% in last 2 years and Equity whereas the Shareholders fund has witnessed a CAGR of around 18% .

• GoG has issued a notification dated 12th December 2008 modifying the earlier notification dated 3rd October 2006, whereby bifurcating the earlier notified entry share capital into equity share capital and share premium w.e.f 1st April 2008.

• As can be analysed, the Debt:Equity proportion of UGVCL was around 60:40 and 55:45 in FY 2005-06 and FY 2006-07 respectively. However, due to the repayment of debt and equity infusion from GoG, the debt:equity ratio has been improved to 40:60 ratio.

5.3 Ratio Analysis

Table 15: Ratio analysis for last 5 years

Ratios Formula FY 06 FY 07 FY 08 FY 09 FY 10

Operating Cost to Sales (PP Cost + O&M)/ Sales 123% 124% 124% 112% 111% Operating Cost to Total Revenue

(PP Cost + O&M)/ Total Revenue

92% 93% 94% 94% 95%

PBT to Revenue PBT / Sales 0.49% 0.90% 0.07% 0.21% 0.18%

Return on Equity - (Pre-Tax) PBT / Equity 1.8% 2.9% 0.3% 0.8% 0.7%

Return on Capital Employed PBDIT/(Debt+Equity) 14% 13% 11% 12% 14%

Debt:Equity Debt / Equity 1.52 1.24 1.26 0.96 0.68 Current Ratio Current Assets /

Current Liabilities 2.26 2.16 0.99 1.25 0.98


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Ratios Formula FY 06 FY 07 FY 08 FY 09 FY 10

Receivables in proportion to Sales

Receivables / Total Revenue

14% 12% 13% 12% 12%

Payables in proportion to Total Cost

Payables / Total Cost 10% 13% 27% 22% 22%

Debtors Collection period Debtors / Total Revenue * 365

49.83 43.58 46.88 42.03 42.70

5.3.1 Operating Cost to Sales Ratio

• Although the operation cost to sales is more than 100%, revenue subsidies and other income offsets the effect of higher operating cost which can be seen in the next ratio of operating cost to total sales. The operating cost to total sales ratio has been almost consistent around 92% to 95% throughout the period FY06 to FY 10.

5.3.2 PBT to Revenue Ratio

• The PBT to Revenue ratio is decreasing during last the 5 years period. The reasons for the same are increased power purchase cost, increased employee costs and high depreciation.

5.3.3 Return on Equity - (Pre-Tax) Ratio

• As per the GERC (Terms & Conditions of Tariff) Regulations, 2005, the norm related to return on Equity entitles the generating business the RoE of 14%. However, as the actual performance is not matching upto the performance levels fixed by the Commission, the Return on Equity (Pre-Tax) has been excessively low.

5.3.4 Return on Capital Employed Ratio

• The return on capital employed has been almost consistent in the range of 11% to 14% through-out the period of last 5 years.

5.3.5 Debt Equity Ratio

• Ideal debt equity is expected to be 2.33%. However in UGVCL case, the proportion of equity is more than debt in last 2 years due to increase in Equity and deferred Government Grants, Subsidies & Contributions.

5.3.6 Current Ratio

• The current ratio was higher than in the initial period but for FY10 it reached to


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0.98. That indicates that liquidity position of the company needs to be improved to meet the quick liquidity requirement to meet the operation of the business.

5.3.7 Debtors collection period

• The receivable day for UGVCL have declined significantly during the period FY 05-06 to 09-10. As an efficient collection management, the collection period is around 45 days which is considered to be efficient cash management.

5.4 Analysis of Capital Expenditure

5.4.1 The basic need/objective of incurring the capital expenditure is to upgrade the ageing and weak distribution network to desirable standards so as to provide better network reliability and sustainable performance. It has been therefore felt essential to take necessary measures, in order to meet the challenges thrown by the Electricity Act 2003 and rules made there under like Standard of Performance (SoP) regulation framed by Hon’ble GERC.

5.4.2 Capital expenditure incurred by the UGVCL in FY 2009-10 was Rs.220 Crores. The

scheme-wise capital expenditure incurred in FY 2009-10 is as shown below.

Table 16:Scheme-wise details of Capital Expenditure

Schemes FY 2009-10 Distribution Schemes Normal Development Scheme 103

System improvement Scheme 22

Jyotigram Yojana 3

Eletrification hutments/Zuppatpatti 17

Kutir Jyoti Scheme 3

Scheme for meters 0

Vivekadhin 5

Replacement of Assets 0

Others 0

Total 153

Rural Electrification Scheme

TASP (Wells & Petapara) 24

Special Component Plan 5

Non TASP Wells 0

REC Wells (DPB, Meter, Adivasi Area, OA & SPA) 9

BADP 0


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Schemes FY 2009-10 Total 38

Non Plan Schemes

RGGVY 18

APDRP 3

Total 21

Others New Schemes

Hand held instrument 1

GE 14.91 to 14.96 4

Load Shedding transformers 2

RAPDRP 1

Total 8

Capital Expenditure Total 220

5.4.3 As can be seen from the above table, majority of the Capex has been spent on the

distribution schemes. It shows the UGVCL is planning the re-enforcement of the system to provide quality, security and availability of power supply to the consumers, to undertake system development to meet the load growth, achieving the targeted reduction in system losses, and other improvement works to enhance customer service and fulfil social obligation such as electrification of un-served areas.


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6. Power Sector Overview

6.1 Background

6.1.1 India in the emerging markets has been one of the fastest growing economies. The Indian economy has posted more than 9% growth for three years consecutively and has seen a decade of more than 7% growth consistently. Energy requirement and supply is a strategic input and one of a key mover for economic and social development behind any growing country. As energy plays a very vital role in industrial production and common man’s life, it has become extremely essential to boost the growth in energy segment for the growth of the country.

6.1.2 With the growing demand in energy requirement, the annual per capita energy

consumption has grown significantly. The low per capita consumption of electric power in India compared to the world average presents a significant potential for sustainable growth in the demand for electric power in India. According to the 17th Electric Power Survey (EPS), May 2007, India’s peak demand is expected to grow at a CAGR of 7.6% over a period of 10 years (FY 2007 to FY 2017) and would require a generating capacity of 300,000 MW by 2017. To cater to this demand compared to an installed capacity of 159399 MW as on March 31, 2010.

6.2 All India Installed Capacity

6.2.1 The all India Region wise generating installed capacity (GW) of Power Utilities is

given hereunder: Figure 12: All Indian Installed Capacity – 31st March 2010 (GW)

13.317.45 11.11 3.88 1.12

25 36 23

17

1.04

2 2

1

2 5

8

0.33

0.21

North - 42 GW West - 50 GW South - 43 GW East - 21 GW North East - 2.4 GW

RenewableNuclearThermalHydro


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6.2.2 India has the fifth largest generation capacity in the world with an installed capacity of 159 GW as on 31st March 2010, which is about 4 percent of global power generation. The top four countries, viz., US, Japan, China and Russia together consume about 49 percent of the total power generated globally. The average per capita consumption of electricity in India is estimated to be 704 kWh during 2008-09. However, this is fairly low when compared to that of some of the developed and emerging nations such US (~15,000 kWh) and China (~1,800 kWh). The Indian government has set ambitious goals in the 11th plan for power sector owing to which the power sector is poised for significant expansion. In order to provide availability of over 1000 units of per capita electricity by year 2012, it has been estimated that need-based capacity addition of more than 100,000 MW would be required. This has resulted in massive addition plans being proposed in the sub-sectors of Generation Transmission and Distribution.

6.2.3 The western region accounts for ~32% of the total installed capacity in the country

out of which Gujarat contributes around 35% of total available installed capacity of Western Region. Installed capacity from coal, accounts for around 53% of the country’s total installed capacity. The break-up of various fuels in the total generation capacity of India is shown below:

Figure 13: Fuel wise Installed Capacity in India

53%

10%

1%3%

23%

10%

Coal Gas Diesel Nuclear Hydro Renewables


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6.2.4 Historically, India has experienced shortages in energy and peak power requirements. Peak deficit averaged 12.8% and energy deficit averaged 9.02% during FY 2003 to FY 2010. The shortages in energy and peak power have been primarily due to the slow pace of capacity addition and the growing demand.

Figure 14: Peak and Energy Deficit in India

6.3 Actual power Supply Position in India

6.3.1 The demand supply for electricity has increased manifold, despite significant overall progress in the power sector, there has been a significant gap between demand and supply. The Peak deficit and Energy Deficit for the FY 2009-10 is outlined in the figure below:

Figure 15: Region wise Peak and Energy Deficit

6.3.2 Western and Northern regions are the major contributors to deficit. Western Region

contributes about 18% of peak deficit and 14% of energy deficit in the country which is highest in compare to other region. Rural electrification & economic growth has put power infrastructure under stress.


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6.4 Power Sector in Gujarat

6.4.1 As per the enactment of the Electricity Act, 2003 and the Gujarat Electricity Industry (Reorganization and Regulation) Act, 2003, Government of Gujarat transferred the assets, liabilities, proceedings and personnel from Erstwhile Gujarat Electricity Board (GEB), into six successor transferee Companies i.e. one Generation Corporation, one Transmission Corporation and four Distribution Companies through various Notifications, Government Resolutions and Transfer Schemes. These successor transferee Companies are:

a) Gujarat State Electricity Corporation Limited (GSECL) - (A Generation Company) b) Gujarat Energy Transmission Corporation Limited (GETCO) - (A Transmission

Company) c) Four Distribution Companies:

i. Dakshin Gujarat Vij Company Limited (DGVCL) ii. Madhya Gujarat Vij Company Limited (MGVCL)

iii. Uttar Gujarat Vij Company Limited (UGVCL) iv. Paschim Gujarat Vij Company Limited (PGVCL)

6.4.2 As per resolution of Government of Gujarat, a new company named Gujarat Urja

Vikas Nigam Ltd. (GUVNL) was incorporated in December, 2004 to carry out the residual functions (including power trading) of the erstwhile GEB.

6.4.3 Apart from these there are two private distribution licensees in the state of Gujarat.

• Torrent Power Ltd. has license to distribute the power in Ahemadabad, Gandhinagar and Surat. Torrent has a generation capacity of 1647.5 MW and distributes power to more than 2 million customers annually in Ahmedabad, Gandhinagar, Surat.

• Kandla Port Trust distributes the power in Knadla Port area. It purchases around 8 MUs from GUVNL at Bulk Supply tariff rates and supplies to consumers in Kandla Port Area.

6.5 Installed Capacity available to Gujarat

6.5.1 The state has access to a total installed capacity of around 13,908 MW. The split up of installed capacity in the state as on March 2010 is as per the fuel and owned by is provided below:


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Figure 16: Installed Capacity in Gujarat as on 31.03.2010 (MW)

6.6 Power Supply Position of Gujarat from CEA

6.6.1 In the past, there has been a consistent gap in the peak demand and peak met as well as in energy terms in the state. The state has been unable to meet the ever-growing demand due to industrial and economic growth of the state. Although the state is still facing the peak deficit, after serving the off peak demand the GUVNL remains with some surplus power. GUVNL sells the surplus power and earning good amount of profit. The following table shows the actual power supply situation in the state for the past few years.

Table 17: Actual power Supply Position as on 31.03.2010 from CEA

Period Peak

Demand Peak Met



Energy Requirement

Energy Availability



(MW) (MW) (MW) (%) (MU) (MU) (MU) (%) 2002-03 8641 7336 -1305 -15.1 60175 53316 -6859 -11.4

2003-04 9820 7204 -2616 -26.6 57171 50292 -6879 -12

2004-05 10162 7578 -2584 -25.4 59681 52724 -6957 -11.7

2005-06 9783 7610 -2173 -22.2 57137 52436 -4701 -8.2

2006-07 11619 8110 -3509 -30.2 62464 54083 -8381 -13.4

2007-08 12119 8885 -3234 -26.7 68747 57614 -11133 -16.2

2008-09 11841 8960 -2881 -24.3 67516 60885 -6631 -9.8

2009-10 10,406 9,515 -891 -8.6 70,412 67,263 -3,149 -4.5

Source: Power Scenario at a Glance, April 2010, CEA


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6.6.2 Before unbundling, it was facing heavy T&D losses, poor collection efficiency, excessive load shedding, a deteriorating and overloaded distribution network and inadequate consumer services. The disparity between demand and supply was apparent and the lack of investment in the power sector has its role in hindering any plans the company had.

6.7 Allocated Capacity to UGVCL (As on 1/10/10)

6.7.1 UGVCL has been currently allocated share of generation capacities as per the scheme worked out by GUVNL. The capacity allocated is from the plants owned by State Government / Central Government and private IPP’s.

Table 18 : Allocated Capacity to UGVCL as on 01.10.2010

Power Plants UGVCL Ukai TPS 467

Gandhinagar V 84

Wanakbori I to VI 308

Wanakbori VII 84

Kutch Lignite I to III 86

Kutch Lignite IV 30

Dhuvaran Gas I 43

Dhuvaran Gas II 45

GPEC 106

GIPCL II (165) 66

GIPCL-SLPP 200

GSEG 62

GMDC - Akrimota 100

NPC - Tarapur- 1&2 64

NPC - Kakrapar 50

NPC - Tarapur- 3&4 164

NTPC - KORBA 144

NTPC - Jhanor 95

NTPC - VINDHYACHAL - I 92

NTPC - VINDHYACHAL - II 96

NTPC - VINDHYACHAL - III 106

NTPC - Sipat Stage - II 109

SSNNL - Hydro 116

Wind Farms (1.75) 260

APPL 250

Ukai TPS 467


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6.8 Promotion of Solar Energy

6.8.1 Gujarat Urja Vikas Nigam Ltd. had signed power purchase agreements for about 1300 MW of solar energy, the highest in India's solar power sector, during the Vibrant Gujarat Global Investors' Summit in 2009.

6.8.2 After having successfully allotting 716 MW of solar power generation capacity to 34 national and international project developers in the first round, Gujarat government has allotted another 565 MW capacity to various power project developers.

6.8.3 The government has initiated efforts to achieve 1,000 MW solar installations by the end of the year 2012 and 3,000 MW in the subsequent five years. The Gujarat Electricity Regulatory Authority (GERC) has fixed Rs.15/- per unit of power produced from solar PV panels and Rs.11/- for solar thermal power generation for the initial 12 years of power production.

6.9 Power purchase for UGVCL

6.9.1 The company has been currently allocated share of generation capacities as per the scheme worked out by GUVNL. In order to minimize power purchase cost, GUVNL adopts the Merit Order Despatch principles for despatching power from the generating stations based on the demand and as this power gets allocated to UGVCL.

6.9.2 During the year, based on requirement of power, the generation capacities have been allocated to UGVCL. Based on this allocation, if there is surplus of power then Distribution Company sells the power to other distribution company and if there is deficit of power then power is bought from other distribution company.

6.9.3 The total power purchase cost for the company for the FY 2009-10 consists of the basic power purchase cost, transmission charges payable to GETCO and PGCIL and the Discom’s share of GUVNL cost. Based on the same, the comparison of the approved and the actual cost of power purchase are as shown below:

Particulars FY 2009-10 (Approved)

FY 2009-10 (Actual)

Total Power Purchase Cost (Rs Crs) 3,859 3,987 6.9.4 The variation in the approved and the revised estimate of power purchase expenses

is on account of various reasons including, change in cost of power, change in


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quantum of power purchased, consequent changes in the transmission charges payable and GUVNL cost allocation.

6.9.5 The quantum of power purchase depends upon the sales during the year as well as

the losses in the system. The sales during 2009-10 have been increased by 7% as against the sales approved by Hon’ble Commission. Although the distribution losses have decreased substantially, the transmission losses have been slightly higher than the approved level and hence, the quantum of power purchased was slightly higher approved. Thus there will be an extra cost implication on account of this factor.


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7. Regulatory Framework

7.1 Background

7.1.1 As per the Constitution, the power sector in India was the combined responsibility of Central and State Government. Over the years, reforms in Indian power sector have been driven by the Union Government in an endeavour to achieve sustainable growth & improvement in operational efficiencies. One of the hallmarks of this reform Agenda is the Electricity Act, 2003 (hereinafter referred as EA, 2003 or simply the “Act” unless specified otherwise).

7.1.2 The power sector in the country had been guided by the Electricity Supply Act, 1948 and various rules set out there under. The entities involved in the power sector were the State Electricity Boards (SEB), electricity departments, generating companies and licensees. The SEB were integrated utilities responsible for generation, transmission and distribution of power for each of the states in the country. The generating companies were the Central Generating companies responsible for supplying power to the grid without any specific responsibility for retail distribution, for e.g. NTPC, NHPC and NPCIL. The licensees were private-sector utilities licensed by a State Government for power generation, distribution, or both within a specified area for e.g. Gujarat Industrial Power Corporation Limited (GIPCL), Bombay Suburban Electric Supply Limited (BSES) and Tata Electric Company (TEC), etc.

7.1.3 The sector over the years has grown under the aegis of State Electricity Boards,

which have assumed a monolithic structure with the responsibility of generation, transmission and distribution. The sector had very limited pockets of private sector investments (specifically in generation after liberalization and opening up of generation sector to private investment and certain urban areas of distribution). The SEB’s were operating under a monopolistic environment. While the SEBs, over the years has contributed to the accelerated growth in the sector, the performance of the SEB required significant improvement.

7.1.4 However, by the 1990s, the SEBs were found to be beset with unsustainable

inefficiencies, unviable tariffs, high T&D losses, mounting subsidies, sub-optimal performance, wasteful practices and lackadaisical financial management. All these factors led to financial fragility of the entire sector. Due to the uninspiring financial


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position of the vertically integrated monolithic SEBs, the power sector was failing to attract the much-needed investments for its development. Power sector reforms were necessary to further the economic liberalization going on in the country. Certain policies were introduced like the Private Power Policy, Policy for setting up Mega Power Projects in Private Sector, enactment of Electricity Regulatory Commission Act, 1998. These Policies still did not have the desired impact of increasing Private generation and bringing the desired investment in the Power sector. While certain states have adopted reforms in the sector, through enactment of necessary legislation, there was a need to provide a uniform approach for the reforms and provide necessary impetus for sound, sustainable commercial growth in the sector. In order to enable the same, the Government of India has enacted Electricity Act 2003, which has paved the way for accelerated reforms, growth in the sector, and introduction of competition and efficiency in various functions.

7.2 Salient features of Electricity Act, 03

The Government of India notified The Electricity Act, 2003 with effect from 10th June 2003 requires the State Governments to initiate major changes in the Industry Structure and Operations of the state power sector. The broad objectives of the Electricity Act, 2003 as incorporated in its preamble is to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry through way of reforms and restructuring, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.

The major provisions of the electricity Act 2003 were:

• Thrust to complete the rural electrification and provide for management of rural distribution by Panchayats, Cooperative Societies, non-Government organizations, franchisees etc. (Sections 4, 5 & 6);

• Delicensing of generation and promotion of captive generation (Sections 7 & 9);

• Provision for license free generation and distribution in the rural areas (Section 14);

• Introduction of open access in transmission and distribution (Section 38(d) and 42(2) of EA 2003).


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• The State Electricity Regulatory Commission is a mandatory requirement (Section 82);

• Gradual phasing out of cross subsidy (Section 61g of EA 2003);

• Power procurement through competitive bidding (Section 63 of EA 2003).

• Provision for payment of subsidy through budget (Section 65);

• Trading, a distinct activity is being recognized with the safeguard of the Regulatory Commissions being authorized to fix ceilings on trading margins, if necessary. (Sections 12, 79 & 86);

• Reorganization of SEBs. (Sections 131);

• Metering of all electricity supplied made mandatory. (Section 55);

• Constitution of an Appellate Tribunal to hear appeals against the decision of the CERC and SERCs. (Section 111);

• More stringent provisions relating to theft of electricity (Section 135-150);

• Provisions safeguarding consumer interests. (Sections 57-59, 166), Ombudsman scheme (Section 42) for consumer’s grievance redressal.

Thus, the Electricity Act, 2003 is a historic legislation which not only integrates the previous Act, but also goes beyond by creating a competitive environment and facilitating investment in the sector and at the same time giving due importance to consumers.

7.2.1 Features of Electricity Act, 03 providing a significant impact

Among the many features in EA 2003, some are expected to have significant impact on the structure of the sector as follows:

• Opening up of generation, with inclusion of wider definition for captive generation;

• Provision of open access in transmission immediately;

• Provision of open access in distribution, in phases as directed by the Regulator;

• User charges for open access include transmission and wheeling charges. Open access in transmission and distribution to be provided at a surcharge / additional surcharge, as the case may be to meet the present cross-subsidies among consumer categories. However, open access by Captive generators would not attract surcharge;

• Competition in distribution through multiple license;

• Separation of power trading and power transmission, with requirements of


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licensing for trading activity;

• Load dispatch activity under Government controlled entities;

• National Policies on various aspects would provide guiding framework for the sector parameters.

7.2.2 Implications of Electricity Act, 03

Some of the major implications of the EA 2003 on the industry have been summarized in the following sections:

a. Generation is delicensed:

b.

The Act has delicensed and freed generation capacity addition. However hydro projects would need the approval of the state government and clearance from the Central Electricity Authority. Generators only need to meet technical standards with respect to connectivity to the grid. It is believed that this will attract interest from private sector companies, especially in case of captive power plants (definition of the Captive Power Plan includes a wide range of investors and with open access provisions, is expected to provide power at competitive rates to the captive users). Further, the nature of arrangement for sale of power contemplated under the Act provides direct access of revenues of the consumers to the generators, thereby enhancing bankability of the projects for increased investments.

Distributed Generation

c.

: Further, under the Act no license would be required for generation and distribution in rural areas as notified by the State Government. While the provision encourages rural investment in the sector, the same may need to be structured, given the characteristics of rural supplies.

Open access to transmission lines: Open access of transmission facilities, owned by Central as well as State transmission companies, will be provided to the users, on enactment of the Act, subject to the availability of transmission capacity. The open access to the users will be provided, at specified transmission / wheeling charges. In addition, open access will be provided on levy of surcharge (which is not applicable for captive users and licensees), to meet the cross subsidy requirements in the sector. The surcharge is expected to gradually decrease within the period stipulated by SERC, with rationalization of consumer tariffs. While the open access provision is expected to enable efficiencies in generation to keep generation tariffs at competitive levels for the consumers (distribution licensees, traders


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and bulk consumers), efficient operation of open access would depend upon a number of factors, which would include capacity in the network, infrastructure for tracking the trades initiated through open access, system controls, balancing mechanism, etc. Further, it provides scope for release of stranded generation capacities (captives) and integration of generation and distribution business.

d. Open access in distribution to be allowed in a phased manner

e.

: Akin to the open access in transmission, open access in distribution would also be provided, in a phased manner, as decided by the Regulator. While the open access in distribution is subject to surcharge and additional surcharge (fixed charge for service obligation), the provision is expected to bring in competition in the distribution business.

Trading of Power

f.

: Trading in power, hitherto limited to PTC, traders and some SEBs is expected to be a major activity in future. Further, the trading activity is also required to be outside the Transco / SEB and would be a regulated business. Along with the new trading outfits, the distribution business (as the license provides trading activity) could compete for the trading business. The trading function is likely to bring in competition and efficiency in supply of power to licensees as well as consumers through balancing of various contracts. The trading function is also expected to provide impetus for development of power markets in India.

Exclusivity of distribution license removed

g.

: The distribution licensee will no longer have exclusive rights for the licensed area. Any company with technical and financial capability can seek license in an already licensed area and undertake distribution of electricity by way of parallel licensing. This would enable competition for the distribution business. However, the provision may lead to “cherry picking” of the areas for licensing, resulting in a potential threat for the existing license holders.

State Electricity Regulatory Commission is a mandatory requirement

h.

: With establishment of SERCs, necessary regulatory framework for the power sector would be put in place. The Regulatory Commission could be mandated to provide necessary directives for development of the sector, keeping in view the concerns of all the stakeholders, to meet the overall objectives.

Provision for payment of subsidy through Budget: The provision of payment of subsidy to the utilities in a timely manner would improve the liquidity in the sector, where subsidized structure of tariffs is in place. The state government henceforth needs to make necessary budgetary provisions for


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the subsidy payment to keep up the desired level of socio-economic obligations.

i. Issues concerning theft and losses in the system

j.

: Metering of all electricity supplied has been made mandatory, thereby bringing in necessary energy audit and accounting systems into the sector. Further the anti-theft provisions would enable the Discoms to plug pilferage of power and enforce the penalties, to improve their operational efficiencies.

Rural electrification

(i) basic infrastructure such as Distribution Transformer and Distribution lines are provided in the inhabited locality within the revenue boundary of the village, including atleast one Dalit Basti/ hamlet as applicable;

: Rural electricity involves supply of energy for various production oriented activities like minor irrigation, rural industries etc. as well as for electrification of villages. A village is declared to be electrified if:-

(ii) electricity is provided on demand to public places like schools, panchayat office, health centres, dispensaries, community centers, etc;

(iii) the ratings of distribution transformer and LT lines to be provided in the village would be finalized as per the anticipated number of connections decided in consultation with the Panchayat / Zila Parishad / District Administration who will also issue the necessary certificate of village electrification on completion of the works; and

(iv) the number of households electrified are at least 10% of the total number of households in the village.

'Rural Electrification' has been regarded as a vital programme for socioeconomic development of rural areas. It aims to trigger economic growth and generate employment by providing electricity as an input for productive uses in agriculture and rural industries. Accordingly, both the Central Government and the State Governments are making all efforts to secure electricity access to all rural households and to ensure that it reaches poor and marginal sections of the society at reasonable rates. Several programmes has been launched, from time to time, for electrification of rural areas. Some of them are:-

• Pradhan Mantri Gramodya Yojana (PMGY)

• Kutir Jyoti Scheme


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• Accelerated Rural Electrification Programme

• Accelerated Electrification of One lakh Villages and One Crore Households

• Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)

As is observed, the provisions of the EA2003 mentioned above, have far reaching implications for the power sector and there are clear directions in the Act for reorganizing the power sector and establishing commercial relationships among themselves. It is evident from the above provisions that the EA2003 intends to create a competitive power sector in the long term and has left no choice for the state utilities but to improve their performance to face the competition from other players entering into the market. However, the Act has provided certain timelines with the Regulators subject to the national level guidelines on various issues such as Tariff Policy.

7.3 National Electricity Policy, 2005

7.3.1 Recognizing that electricity is one of the key drivers for rapid economic growth and poverty alleviation, the nation has set itself the target of providing access to all households in next five years. As per Census 2001, about 44% of the households do not have access to electricity. Hence meeting the target of providing universal access is a daunting task requiring significant addition to generation capacity and expansion of the transmission and distribution network.

7.3.2 Indian Power sector is witnessing major changes. Growth of Power Sector in India since its Independence has been noteworthy. However, the demand for power has been outstripping the growth of availability. Substantial peak and energy shortages prevail in the country. This is due to inadequacies in generation, transmission & distribution as well as inefficient use of electricity. Very high level of technical and commercial losses and lack of commercial approach in management of utilities has led to unsustainable financial operations. Cross-subsidies have risen to unsustainable levels. Inadequacies in distribution networks have been one of the major reasons for poor quality of supply.

7.3.3 Electricity industry is capital-intensive having long gestation period. Resources of power generation are unevenly dispersed across the country. Electricity is a commodity that cannot be stored in the grid where demand and supply have to be


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continuously balanced. The widely distributed and rapidly increasing demand requirements of the country need to be met in an optimum manner.

7.3.4 Electricity Act, 2003 provides an enabling framework for accelerated and more efficient development of the power sector. The Act seeks to encourage competition with appropriate regulatory intervention. Competition is expected to yield efficiency gains and in turn result in availability of quality supply of electricity to consumers at competitive rates.

7.3.5 Section 3 (1) of the Electricity Act 2003 requires the Central Government to

formulate, inter alia, the National Electricity Policy in consultation with Central Electricity Authority (CEA) and State Governments. The provision is quoted below:

"The Central Government shall, from time to time, prepare the National Electricity Policy and tariff policy, in consultation with the State Governments and the Authority for development of the power system based on optimal utilization of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy".

7.3.6 Section 3 (3) of the Act enables the Central Government to review or revise the

National Electricity Policy from time to time. The Ministry of Power in compliance to the section 3 of the Electricity Act 2003 notified the National Electricity Policy in February 2005 through which the legislative provisions of the EA 2003 were to be administered and implemented.

7.3.7 The National Electricity Policy outlines a plan for rural electrification and increased

generation capacity. The policy states that “maximum emphasis” would be put on the development of hydro power. Use of thermal power could be made cleaner by using low-ash coal, improving lignite mining, and increased use of natural gas and nuclear power. The policy also sets recommendations for improving the power grid with better transmission and distribution of power. It also calls for the use of the most efficient technologies and more funding for R&D. India also seeks to create a more competitive energy sector to increase private sector participation. Finally, the Policy emphasizes the need for conservation and demand-side management including a national awareness campaign.

7.3.8 The main aim of the policy was:


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• Access of power - available for all households by year 2009;

• Availability of Power – Eliminating power shortages by year 2012 and Energy and peaking shortages to be overcome and adequate spinning reserve to be available;

• Supply of reliable and quality power of specified standards in an efficient manner and at reasonable rates;

• Per capita availability of electricity to be increased to over 1000 units by 2012;

• Minimum lifeline consumption of 1 unit/household/day as a merit good by 2012;

• Financial turnaround and commercial viability of electricity sector;

• Protection of consumers’ interests;

7.4 National Electricity Plan

7.4.1 Assessment of demand is an important pre-requisite for planning capacity addition. Section 3 (4) of the Act requires the Central Electricity Authority (CEA) to frame a National Electricity Plan once in five years and revise the same from time to time in accordance with the National Electricity Policy. Also, section 73 (a) provides that formulation of short-term and perspective plans for development of the electricity system and coordinating the activities of various planning agencies for the optimal utilization of resources to sub serve the interests of the national economy shall be one of the functions of the CEA. The Plan prepared by CEA and approved by the Central Government can be used by prospective generating companies, transmission utilities and transmission/distribution licensees as reference document.

• Distribution is the most critical segment of the electricity business chain. The real challenge of reforms in the power sector lies in efficient management of the distribution sector. The Act provides for a robust regulatory framework for distribution licensees to safeguard consumer interests. It also creates a competitive framework for the distribution business, offering options to consumers, through the concepts of open access and multiple licensees in the same area of supply.

Distribution

For achieving efficiency gains proper restructuring of distribution utilities is essential. Adequate transition financing support would also be necessary for these utilities. Such support should be arranged linked to attainment of predetermined efficiency improvements and reduction in cash losses and putting in place appropriate governance structure for insulating the service providers


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from extraneous interference while at the same time ensuring transparency and accountability. For ensuring financial viability and sustainability, State Governments would need to restructure the liabilities of the State Electricity Boards to ensure that the successor companies are not burdened with past liabilities. The Central Government would also assist the States, which develop a clear roadmap for turnaround, in arranging transition financing from various sources which shall be linked to predetermined improvements and efficiency gains aimed at attaining financial viability and also putting in place appropriate governance structures. Conducive business environment in terms of adequate returns and suitable transitional model with predetermined improvements in efficiency parameters in distribution business would be necessary for facilitating funding and attracting investments in distribution. Multi-Year Tariff (MYT) framework

The Electricity Act 2003

is an important structural incentive to minimize risks for utilities and consumers, promote efficiency and rapid reduction of system losses. It would serve public interest through economic efficiency and improved service quality. It would also bring greater predictability to consumer tariffs by restricting tariff adjustments to known indicators such as power purchase prices and inflation indices.

enables competing generating companies and trading licensees

A

, besides the area distribution licensees, to sell electricity to consumers when open access in distribution is introduced by the State Electricity Regulatory Commissions. As required by the Act, the SERCs shall notify regulations by June 2005 that would enable open access to distribution networks in terms of sub-section 2 of section 42 which stipulates that such open access would be allowed, not later than five years from 27th January 2004 to consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one mega watt. Section 49 of the Act provides that such consumers who have been allowed open access under section 42 may enter into agreement with any person for supply of electricity on such terms and conditions, including tariff, as may be agreed upon by them. While making regulations for open access in distribution, the SERCs will also determine wheeling charges and cross-subsidy surcharge as required under section 42 of the Act.

time-bound programme should be drawn up by the State Electricity Regulatory Commissions (SERC) for segregation of technical and commercial losses through energy audits. Energy accounting and declaration of its results in each defined unit, as determined by SERCs, should be mandatory not later than March 2007. An action plan for reduction of the losses with adequate


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investments and suitable improvements in governance should be drawn up. Standards for reliability and quality of supply as well as for loss levels shall also be specified, from time to time, so as to bring these in line with international practices by year 2012.

Private sector participation in distribution needs to be encouraged for achieving the requisite reduction in transmission and distribution losses and improving the quality of service to the consumers.

One of the key provisions of the Act on competition in distribution is the concept of multiple licensees in the same area of supply through their independent distribution systems. State Governments have full flexibility in carving out distribution zones while restructuring the Government utilities. For grant of second and subsequent distribution licence within the area of an incumbent distribution licensee, a revenue district, a Municipal Council for a smaller urban area or a Municipal Corporation for a larger urban area as defined in the Article 243(Q) of Constitution of India (74th Amendment) may be considered as the minimum area. The Government of India would notify within three months, the requirements for compliance by applicant for second and subsequent distribution licence as envisaged in Section 14 of the Act. With a view to provide benefits of competition to all section of consumers, the second and subsequent licensee for distribution in the same area shall have obligation to supply to all consumers in accordance with provisions of section 43 of the Electricity Act 2003. The SERCs are required to regulate the tariff including connection charges to be recovered by a distribution licensee under the provisions of the Act. This will ensure that second distribution licensee does not resort to cherry picking by demanding unreasonable connection charges from consumers.

The Act mandates supply of electricity through a correct meter within a stipulated period. The Authority should develop regulations as required under Section 55 of the Act within three months. The Act requires all consumers to be metered within two years. The SERCs may obtain from the Distribution Licensees their metering plans, approve these, and monitor the same. The SERCs should encourage use of pre-paid meters. In the first instance, TOD meters for large consumers with a minimum load of one MVA are also to be encouraged. The SERCs should also put in place independent third-party meter testing arrangements.

Modern information technology systems may be implemented by the utilities on a priority basis, after considering cost and benefits, to facilitate creation of network information and customer data base which will help in management


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of load, improvement in quality, detection of theft and tampering, customer information and prompt and correct billing and collection. Special emphasis should be placed on consumer indexing and mapping in a time bound manner. Support is being provided for information technology based systems under the Accelerated Power Development and Reforms Programme (APDRP).

High Voltage Distribution System is an effective method for reduction of technical losses, prevention of theft, improved voltage profile and better consumer service. It should be promoted to reduce LT/HT ratio keeping in view the techno economic considerations.

SCADA and data management systems are useful for efficient working of Distribution Systems. A time bound programme for implementation of SCADA and data management system should be obtained from Distribution Licensees and approved by the SERCs keeping in view the techno economic considerations. Efforts should be made to install substation automation equipment in a phased manner.

The Act has provided for stringent measures against theft of electricity. The States and distribution utilities should ensure effective implementation of these provisions. The State Governments may set up Special Courts as envisaged in Section 153 of the Act.

• There is an urgent need for ensuring recovery of cost of service from consumers to make the power sector sustainable. A minimum level of support may be required to make the electricity affordable for consumers of very poor category. Consumers below poverty line who consume below a specified level, say 30 units per month, may receive special support in terms of tariff which are cross-subsidized. Tariffs for such designated group of consumers will be at least 50 % of the average (overall) cost of supply. This provision will be further re-examined after five years. Over the last few decades cross-subsidies have increased to unsustainable levels. Cross-subsidies hide inefficiencies and losses in operations. There is urgent need to correct this imbalance without giving tariff shock to consumers. The existing cross-subsidies for other categories of consumers would need to be reduced progressively and gradually. The State Governments may give advance subsidy to the extent they consider appropriate in terms of section 65 of the Act in which case necessary budget provision would be required to be made in advance so that the utility does not suffer financial problems that may

Recovery of Cost of Services & Targeted Subsidies


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affect its operations. Efforts would be made to ensure that the subsidies reach the targeted beneficiaries in the most transparent and efficient way.

• As the power markets develop, it would be feasible to finance projects with competitive generation costs outside the long-term power purchase agreement framework. In the coming years, a significant portion of the installed capacity of new generating stations could participate in competitive power markets. This will increase the depth of the power markets and provide alternatives for both generators and licensees/consumers and in long run would lead to reduction in tariff. For achieving this, the policy underscores the following:-

Competition Aimed At Consumer Benefits

It is the function of the CERC to issue license for inter-state trading which would include authorization for trading throughout the country.

The ABT regime introduced by CERC at the national level has had a positive impact. It has also enabled a credible settlement mechanism for intra-day power transfers from licenses with surpluses to licenses experiencing deficits. SERCs are advised to introduce the ABT regime at the State level within one year. Gujarat is one of the state who has implemented intra-state ABT.

Captive generating plants should be permitted to sell electricity to licensees and consumers when they are allowed open access by SERCs under section 42 of the Act.

Development of power market would need to be undertaken by the Appropriate Commission in consultation with all concerned.

The Central Commission and the State Commissions are empowered to make regulations under section 178 and section 181 of the Act respectively. These regulations will ensure implementation of various provisions of the Act regarding encouragement to competition and also consumer protection. The Regulatory Commissions are advised to notify various regulations expeditiously.

Enabling regulations for inter and intra State trading and also regulations on power exchange shall be notified by the appropriate Commissions within six months.

• It would have to be clearly recognized that Power Sector will remain unviable

until T&D losses are brought down significantly and rapidly. A large number

Transmission & Distribution Losses


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of States have been reporting losses of over 40% in the recent years. By any standards, these are unsustainable and imply a steady decline of power sector operations. Continuation of the present level of losses would not only pose a threat to the power sector operations but also jeopardize the growth prospects of the economy as a whole. No reforms can succeed in the midst of such large pilferages on a continuing basis.

The State Governments would prepare a Plan to bring down these losses expeditiously. Community participation, effective enforcement, incentives for entities, staff and consumers, and technological upgradation should form part of campaign efforts for reducing these losses. The Central Government will provide incentive based assistance to States that are able to reduce losses as per agreed programmes.

UGVCL is one of the successful utility to curb losses and has been in the range of around 15% to 18% in last 3 years. This has been result due to the commitment by the employees of UGVCL and effective decision by the top management.

• There is a significant potential of energy savings through energy efficiency and demand side management measures. In order to minimize the overall requirement, energy conservation and demand side management (DSM) is being accorded high priority. The Energy Conservation Act has been enacted and the Bureau of Energy Efficiency has been setup. The potential number of installations where demand side management and energy conservation measures are to be carried out is very large. Bureau of Energy Efficiency (BEE) shall initiate action in this regard. BEE would also make available the estimated conservation and DSM potential, its staged implementation along with cost estimates for consideration in the planning process for National Electricity Plan.

Energy Conservation

Periodic energy audits have been made compulsory for power intensive industries under the Energy Conservation Act. Other industries may also be encouraged to adopt energy audits and energy conservation measures.

Energy conservation measures shall be adopted in all Government buildings for which saving potential has been estimated to be about 30% energy. Solar water heating systems and solar passive architecture can contribute significantly to this effort. In the field of energy conservation initial approach would be voluntary and self-regulating with emphasis on labelling of appliances. Gradually as awareness increases, a more regulatory approach of


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setting standards would be followed. In the agriculture sector, the pump sets and the water delivery system

engineered for high efficiency would be promoted. In the industrial sector, energy efficient technologies should be used and energy audits carried out to indicate scope for energy conservation measures. Motors and drive system are the major source of high consumption in Agricultural and Industrial Sector. These need to be addressed. Energy efficient lighting technologies should also be adopted in industries, commercial and domestic establishments.

In order to reduce the requirements for capacity additions, the difference between electrical power demand during peak periods and off-peak periods would have to be reduced. Suitable load management techniques should be adopted for this purpose. Differential tariff structure for peak and off peak supply and metering arrangements (Time of Day metering) should be conducive to load management objectives.

Regulatory Commissions should ensure adherence to energy efficiency standards by utilities.

For effective implementation of energy conservation measures, role of Energy Service Companies would be enlarged. Steps would be taken to encourage and incentivise emergence of such companies.

A national campaign for bringing about awareness about energy conservation would be essential to achieve efficient consumption of electricity.

A National Action Plan has been developed. Progress on all the proposed measures will be monitored with reference to the specific plans of action.

• In the new reforms framework ushered by Electricity Act 2003, it is particularly important that the electricity industry has access to properly trained human resource. Therefore, concerted action would be taken for augmenting training infrastructure so that adequate well-trained human resource is made available as per the need of the industry. Special attention would need to be paid by the industry for establishing training infrastructure in the field of electricity distribution, regulation, trading and power markets. Efforts should be made so that personnel of electricity supply industry both in the private and public sector become more cost-conscious and consumer-friendly.

Training And Human Resource Development


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• Non-conventional sources of energy being the most environment friendly

there is an urgent need to promote generation of electricity based on such sources of energy. For this purpose, efforts need to be made to reduce the capital cost of projects based on non-conventional and renewable sources of energy. Cost of energy can also be reduced by promoting competition within such projects. At the same time, adequate promotional measures would also have to be taken for development of technologies and a sustained growth of these sources.

Co-generation and Non-Conventional Energy Sources

The Electricity Act 2003 provides that co-generation and generation of electricity from non-conventional sources would be promoted by the SERCs by providing suitable measures for connectivity with grid and sale of electricity to any person and also by specifying, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee. Such percentage for purchase of power from non-conventional sources should be made applicable for the tariffs to be determined by the SERCs at the earliest. Progressively the share of electricity from non-conventional sources would need to be increased as prescribed by State Electricity Regulatory Commissions. Such purchase by distribution companies shall be through competitive bidding process. Considering the fact that it will take some time before non-conventional technologies compete, in terms of cost, with conventional sources, the Commission may determine an appropriate differential in prices to promote these technologies.

Industries in which both process heat and electricity are needed are well suited for cogeneration of electricity. A significant potential for cogeneration exists in the country, particularly in the sugar industry. SERCs may promote arrangements between the co-generator and the concerned distribution licensee for purchase of surplus power from such plants. Cogeneration system also needs to be encouraged in the overall interest of energy efficiency and also grid stability.

• Appropriate Commission should regulate utilities based on pre-determined indices on quality of power supply. Parameters should include, amongst others, frequency and duration of interruption, voltage parameters, harmonics, transformer failure rates, waiting time for restoration of supply, percentage defective meters and waiting list of new connections. The Appropriate

Protection of Consumer Interests And Quality Standards


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Commissions would specify expected standards of performance. Reliability Index (RI) of supply of power to consumers should be indicated by

the distribution licensee. A road map for declaration of RI for all cities and towns up to the District Headquarter towns as also for rural areas, should be drawn by up SERCs. The data of RI should be compiled and published by CEA.

It is advised that all State Commissions should formulate the guidelines regarding setting up of grievance redressal forum by the licensees as also the regulations regarding the Ombudsman and also appoint/designate the Ombudsman within six months.

The Central Government, the State Governments and Electricity Regulatory Commissions should facilitate capacity building of consumer groups and their effective representation before the Regulatory Commissions. This will enhance the efficacy of regulatory process.

7.5 Tariff Policy

On January 6, 2006, the Central government notified the National Tariff Policy (NTP) for the power sector in compliance with Section 3 of the Electricity Act and in continuation of the National Electricity Policy passed on February 12, 2005. It basically deals with various parameters with respect to the fixation of tariffs, like providing adequate return on investment to the power generator and supplier and ensuring reasonable user charges for the consumers. It provides uniform guidelines to the state electricity regulatory commissions (SERCs) for the fixation of tariffs for their respective entities (as there are independent SERCs for each state) as well as CERC. It addresses some important issues like method of calculation of cross subsidy under open access and the competitive bidding route for procurement of power.

7.5.1 The objective of this Policy was to:

• Ensure availability of electricity to consumers at reasonable and competitive rates;

• Ensure financial viability of the sector and attract investments;

• Promote transparency, consistency and predictability in regulatory approaches across jurisdictions and minimise perceptions of regulatory risks;

• Promote competition, efficiency in operations and improvement in quality of supply.

7.5.2 The NTP deals with the general approach to tariffs, wherein it talks about issues such


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as return on investment and equity norms to be abided by project developers. It discusses various other norms for charging depreciation and cost of debt. It lays down certain operating norms to be followed in order to improve efficiency. Besides, it revisits various parameters like renovation and modernisation costs, and multi-year tariffs (MYT) and talks about promoting captive and renewable energy. The policy states the MYT must be adopted for determination of any tariffs from April 1, 2006. On an overall basis, the policy tries to clarify various issues to improve efficiency and transparency in the power sector. It also emphasises the need for sharing the efficiency gains, as it specifies that a part of the gains should be passed on to the consumer.

The policy states that the distribution licensee should, in future, procure power solely through competitive bidding. But this norm does not apply in the case of expansion of existing projects. Further, Central generating units and state controlled/owned units are exempted from competitive bidding. However, the expansion of generating capacity by the private developers for this purpose would be restricted to a one-time addition of not more than 50 per cent of the existing capacity. The tariff for all new generating and transmission projects by the public sector would be decided through the competitive bidding route after a period of 5 years or when the regulatory commission thinks the situation is ripe for such competition. The Electricity Act had provided the much-needed impetus to the power sector by opening it up to private investment.

7.6 Tariff Based Competitive Bidding

7.6.1 An important policy instrument adopted by the Government was the comprehensive guidelines on competitive bidding for power project development. The Central Government issued detailed guidelines for tariff based bidding process for procurement of electricity by distribution licensees for medium or long-term period vide notification in January, 2005. The main objective of these guidelines was to see that the distribution companies get electricity at best possible price and thereby consumers get electricity at optimal tariff. This also aims at a transparent process of selection of project developer. Similar dispensation in Transmission segment was also extended and comprehensive guidelines were issued in May 2006.

7.6.2 It is to be noted that India's power sector regulator has already considered a stand that from January 2011, all thermal power projects and transmission systems will be awarded on competitive tariff bidding. This will be open a market for Generators and Transmission facilities developers to evacuate the power from the generating plan to the State Periphery of the Utilities through the transmission line across India.


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However it also provides a limitation for distribution utilities whereby they can procure power only through competitive bidding process even from State Generating units with some exception as specified in National Tariff plan.

7.7 Rural Electrification Policy, 2006

7.7.1 The Ministry of Power issued the Rural Electrification Policy in August 2006 with a view of undertaking socio-economic development of the rural areas. The scheme for Rural electricity infrastructure and household electrification include the Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY). Under the scheme, projects could be financed with 90% capital subsidy for provision of –

• Rural Electricity Distribution Backbone (REDB) - Provision of 33/11 KV (or 66/11 KV) sub-stations of adequate capacity and lines in blocks where these do not exist.

• Creation of Village Electrification Infrastructure (VEI) which includes electrification of un-electrified villages, electrification of un-electrified habitations and Provision of distribution transformers of appropriate capacity in electrified villages / habitation(s).

• Decentralised Distributed Generation (DDG) and Supply: Decentralised generation cum distribution from conventional sources for villages where grid connectivity is either not feasible or not cost effective provided it is not covered under the programme of Ministry of Non-conventional Energy Sources for providing electricity from non-conventional energy sources under their remote village electrification programme.

• REDB, VEI and DDG would also cater to the requirement of agriculture and other activities including irrigation pumpsets, Small and medium industries and Khadi and village industries, cold chains, healthcare, education and IT.

• Rural Household Electrification of Below Poverty Line Households: Electrification of un-electrified Below Poverty Line (BPL) households would be financed with 100% capital subsidy as per norms of Kutir Jyoti Programme in all rural habitations. Households above poverty line would be paying for their connections at prescribed connection charges and no subsidy would be available for this purpose.

7.8 R-APDRP (Restructured Accelerated Power Development & Reform Program)

• The APDRP was launched in 2001 as an initiative by the Government of India and the States for the strengthening of Transmission and Distribution network and


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reduction in AT&C losses. APDRP was aimed to renovate and modernize the old sub stations, strengthen the distribution network, undertake energy accounting, reduce technical and commercial losses and improve consumer services.

• The restructured APDRP (R-APDRP) was launched by Mop, Gol in July 2008 as a central sector scheme for the Eleventh Plan. The scheme comprises of two parts -Part-A & Part-B.

• The Part-A of the scheme is being dedicated to establishment of IT enabled system for achieving reliable and verifiable baseline data system. A 100% loan is provided under R-APDRP for Part-A projects & shall be converted to grant on completion and verification of same by Third Party independent evaluating agencies (TPIEA) being appointed by MoP. The Ministry of Power, Government of India has earmarked Rs. 10,000 Crores for R-APDRP under Part-A.

• Part-B of the scheme deals with Transmission & Distribution system strengthening & upgradation projects. The focus for Part-B is on AT&C loss reduction on sustainable basis. 25% loan is provided under Part-B projects and upto 50% of scheme cost is convertible to grant depending on extent of maintaining AT&C loss level at 15% level for five years. The Ministry of Power, Government of India has earmarked sanctioning of schemes upto Rs. 40,000 Crores under R-APDRP Part-B, of which, upto Rs. 20,000 Crores would be converted to grant depending on extent to which utilities reduce AT&C losses in project areas.

• The R-APDRP scheme also has a provision for Capacity Building of Utility personnel and development of franchises through Part-C of the scheme. Few pilot projects adopting innovations are also envisaged under Part-C.

• Thus, it can be observed that a number of path breaking initiatives have been taken in the recent past in terms of policy pronouncements to revamp the power system. From the distribution perspective, there has been introduction of theft control measures which would enable the utility to reduce losses on account of theft. The recognition of trading as an independent activity will help the utility in the procurement process. The introduction of open access in transmission and phasing of open access in distribution is the right step in providing a competitive environment in the power sector.

7.9 Renewable sources

7.9.1 There are a number of initiatives from the Ministry of New and Renewable Energy (MNRE) for matters relating to renewable energy such as solar, wind, biomass, small hydro, hydrogen, geothermal etc. The endeavour of the Ministry is to promote


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renewable energy technologies and increase the contribution of renewable energy in the total energy mix in the years to come.

7.9.2 The Ministry has a wide range of programmes on research and development, demonstration and promotion of renewable energy for rural, urban, commercial and industrial applications as well as for grid-interactive power generation. A three-fold strategy is being followed:

• Providing budgetary support for research, development and demonstration of technologies;

• Facilitating institutional finance through various financial institutions; and

• Promoting private investment through fiscal incentives, tax holidays, depreciation allowance and remunerative returns for power fed into the grid.

7.9.3 The Government of India has approved of a new policy on the development of Solar energy through the Jawaharlal Nehru National Solar Mission. This will constitute a major contribution by India to the global effort to meet the challenges of climate change.

The objectives of the Solar Mission are:

• To create an enabling policy framework for the deployment of 20,000 MW of solar power by 2022.

• To ramp up capacity of grid-connected solar power generation to 1000 MW within three years – by 2013; an additional 3000 MW by 2017 through the mandatory use of the renewable purchase obligation by utilities backed with a preferential tariff.

• To create favourable conditions for solar manufacturing capability, particularly solar thermal for indigenous production and market leadership.

7.10 Renewable Energy Certificate Mechanism

• CERC has issued the Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation Regulations, 2010.

• Present installed capacity based on renewable is about 15 GW. This requires to be increased to 65 GW in next five years if RPO level is to go up to 10% nationally, as suggested in NAPCC. But a large part of untapped potential is located in the States which have already achieved high levels of RPO. REC


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mechanism is expected to overcome geographical constraints and provide flexibility to achieve RPO compliance.

• Some of the Salient Features of REC Mechanism are:

o RE generators with capacity untied in PPA will have an option to sell electricity and REC separately

o REC will be issued to RE Generators only

o 1 MWhr is 1 REC

o Purchase of REC would be considered as purchase of RE for purpose of RPO compliance.

o Grid Connected RE technology approved by MNRE would be eligible for REC mechanism

o Separate category of Solar REC

o Provision of regulatory charge to enforce compliance of RPO.

o RECs are intra-country tradable certificates and are distinct from carbon credits.

o It is proposed to make RECs eligible for compliance with energy saving obligations.

o Accreditation would be done at State level by State Agency (SA) to be designated by SERC.

o Registration by Central Agency

o Issuance of REC by Central Agency based on injection certificate.

o REC exchange through power exchanges approved by CERC.

o Certificates will be exchanged within floor (minimum) price and forbearance (ceiling) price decided by CERC time to time.

o Monitoring Mechanisms: Appointment of Compliance Auditors by CERC for post monitoring of the REC Transactions.

7.11 National Action Plan for Climate Change (NAPCC)

7.11.1 The country today is faced with a challenge of sustaining its rapid economic growth while dealing with the growing threat of Climate change. The Government has formulated the National Action Plan on Climate Change (NAPCC) outlining existing and future policies and programs addressing climate mitigation and adaptation. For achieving this, the Plan has identified eight National Missions which represent the long term integrated strategies for combating the climate change issues. Of these


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the National Mission in relation to energy relate to:

• National Solar Mission: The NAPCC aims to promote the development and use of solar energy for power generation and other uses with the ultimate objective of making solar competitive with fossil-based energy options. The mission includes specific goals for increasing use of solar thermal technologies in urban areas, industry, and commercial establishments. Other objectives include the establishment of a solar research centre, increased international collaboration on technology development, strengthening of domestic manufacturing capacity, and increased government funding and international support.

• National Mission for Enhanced Energy Efficiency: Building on the Energy Conservation Act 2001, the plan recommends:

a. Mandating specific energy consumption decreases in large energy-consuming industries, with a system for companies to trade energy-savings certificates;

b. Energy incentives, including reduced taxes on energy-efficient appliances; and

c. Financing for public-private partnerships to reduce energy consumption through demand-side management programs in the municipal, buildings and agricultural sectors.

7.11.2 Thus, it can be observed that a number of path breaking initiatives have been taken in the recent past in terms of policy pronouncements to revamp the power system. From the generation perspective, the de-licensing of generation would have a significant impact in the market mainly on account of entry of other players in the generation sector, especially IPP/ Merchant as well as Captive Power Producers, thus increasing the competition in the market. The unleashing of the non-discriminatory open access to the transmission system will have a positive impact on wheeling of power from power surplus states to deficit areas. The generators are in a position to sell their power anywhere in the grid now. On the threat of climate change, there is a need to look at renewable energy as an option for generation on a large scale. Thus the enablers for growth have been put in place to a large extent which will enable growth of the sector in the coming time.


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7.12 State Market Regulations

7.12.1 The above mentioned developments at the national level were followed up by similar enabling environment at the state level also through intervention by State Regulatory Commissions. Various regulations were enacted by the Regulatory Commissions in compliance with the provisions of the EA 2003 and as guided by the National Tariff Policy and National Electricity Policy. Some of the key regulations which were enacted by the Gujarat State Electricity Regulatory Commission as outlined below:

Table 19: List of SERC Regulations for Distribution Licensee

Sr. No Name of the Regulations

1. Appointment of consultants Regulations

2. Open Access Regulations

3. Transmission License Regulations

4. Trading License Regulations

5. Distribution License Regulations

6. SLDC Charges Regulations

7. Fees, Fines & Charges Regulations

8. Power System Management Standards Regulations

9. Standard of Performance of Distribution Licensee Regulations

10. Electricity Supply Code and Related Matters Regulations

11. Terms and Conditions of Tariff Regulations

12. Procedure for filing appeal before the Appellate Authority Regulations

13. Conduct of Business Regulations

14. Establishment of Ombudsman for Redressal of Grievances of Consumers Regulations

15. Establishment of Forum for Redressal of Grievances of Consumers Regulations

16. Grid Code

17. Distribution Code

18. Officers/Staff Service Regulations

19. MYT Regulations

20. Fixing of Trading Margin Regulations

21. Procurement of Energy from Renewable Sources Regulations

22. Designating State Nodal Agency for REC Regulations


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7.12.2 The power sector in the state has been regulated based on the above outlined regulations and the same has also brought in an element of regulatory certainty to an extent in the way the sector functions. As mentioned previously, the above mentioned enactments have had an impact on the sector at the national as well as the state level.

7.12.3 Based on the Regulations by CERC / SERC, the impacts of the same are envisaged in a point wise manner:

A. • Under the Act, no license is required for generation and distribution in rural

areas as notified by the State Government. This however does not have a major impact as there would not be many big private companies presently interested in these rural areas on account of low demand / revenue in these areas.

National Level:

• The provision in the EA 2003 for non-discriminatory open access to the transmission system removes the boundaries for competition. Enhanced role of Trading in the Act further increase the options of consumers to decide source of supply, which in turn makes market more competitive.

• The CERC has approved the setting up of Power exchanges which are operational in the country. This provides a platform for trading of electricity which can be an alternate source of supply of electricity.

• Recognizing the urgent need to address the issue of reducing losses and improving the quality of power delivery, the Ministry of Power (MoP) has focused on implementing distribution reforms and has introduced several measures to further the process. The Act recognizes the need for a strategy that distinguishes urban power distribution from rural electricity supply. It also facilitates establishment of participatory models for rural distribution including electric cooperatives, rural gram panchayats (local government), distribution franchisees, etc. The other program focused on implementing distribution is the Accelerated Power Development Reform Program (APDRP) to finance the modernization of sub-transmission & distribution networks including a system of local management and energy accounting through widespread metering in every state utility’s distribution circles.

• The State owned generation companies are eligible to sell power from new capacity added through MOU route till January 2011 as per the National Tariff Policy. Post January 2011 or such time period as determined by the State


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Commission, new capacity added shall compulsorily be sold to Distribution Companies through competitive bidding process. However, this window is available for a limited period and UGVCL will be exposed to competition from all the private sector players and other Government/PSU generators. UGVCL will also have to go through bidding process to procure power from State Generating Station.

• The Commission in exercise of the powers has notified the GERC (Terms and Conditions of Tariff) Regulations, 2005. The Commission has implemented the Multi-year tariff in Gujarat and benchmark-based performance monitoring has become the practice.

State Level:

• The GERC has issued the GERC (Standards of Performance of Distribution Licensees) Regulations, 2005 which provides the time limits for distribution utilities for carrying out various activities, the quality of supply to be maintained, compensation payable for non-maintenance of standard of performance.

• GERC Issued Licensee’s Power to Recover Expenditure incurred in providing supply and other Miscellaneous Charges Regulations, 2005. These give the provisions for the duty of the distribution licensee to supply electricity on request and recovery of expenditure for supplying the power. These also give the various charges applicable including registration charges, (non refundable), Re-estimate charges, Test Report charges, Testing of Installation Charges Change of name and transfer of Agreement re-connection / Disconnection charges etc.

• The GERC issued the Electricity Supply Code and Related Matters Regulations, 2005 applicable to all Licensees engaged in distribution of electricity and electricity consumers in the State of Gujarat. These provide the system of supply and classification of consumers, procedures for grant of supply, metering and power supply charges (Bills), Restrictions regarding unauthorised use and theft and General Provisions

• The GERC issued (Gujarat Power System Management Standards) 2005 which provide guidelines for the operation and management of power system including power generation, power transmission and power distribution and will be supplemental to Grid Code.

• The GERC issued (Establishment of Forum for Redressal of Grievances of the Consumers) Regulations, 2004.As per these, every Licensee has to establish a Forum in accordance with the Electricity Act, 2003 to ensure prompt redressal of


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Grievances within the timeframe specified in these Regulations and in accordance with the guidelines laid under these Regulations.

• GERC issued Procurement of Energy from Renewable Sources Regulations, 2010. These provides the minimum purchase obligations to Distribution Licensees as well as Captive and Open Access (s) users/consumers from renewable energy sources

7.13 Current GERC Regulations Summary

7.13.1 Standards of Performance (SOP’s) The Commission in exercise of the powers has notified the GERC (Terms and Conditions of Tariff) Regulations, 2005. The Commission has implemented the Multi-year tariff in Gujarat and benchmark-based performance monitoring has become the practice. The GERC has issued the GERC (Standards of Performance of Distribution Licensees) Regulations, 2005 which provides the time limits for distribution utilities for carrying out various activities, the quality of supply to be maintained, compensation payable for non-maintenance of standard of performance Supply distribution licensee shall be the sole interface to the consumer and therefore responsible for adherence to SoP relating to the period of giving supply, quality of supply (voltage, harmonics), system of supply, restoration of supply, restoration in burnt meter cases, reconnection on payment of amounts due. In order to provide non-discriminatory access to the wires, the wheeling distribution licensee should not discriminate between changed-over consumers and its own consumers for provision of wheeling services.

7.13.2 Implementation of Intra State Availability Based Tariff (ABT)

• After restructuring of GEB and separation of power purchase agreement entered into by GUVNL/ distribution licensee and Generating Stations, Intra-State ABT is introduced in Gujarat from 11th August’ 2006 as per order issued by GERC. SLDC-Gujarat has started issuing trial UI bills from 01.12.2006 on weekly basis and round the clock scheduling as per directives of GERC. Based on experience and observation of SLDC-Gujarat, report was submitted to Gujarat Electricity Regulatory Commission for review and commercial operation of Intra State ABT within State.

• The activities carried out by SLDC for the purpose of implementation of Intra State ABT are briefly as under:

o Round the clock Scheduling Activities


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o Data base configuration for scheduling and energy accounting

o Preparation of Trial Accounting

o Formulation of Energy Accounting Committee

o Pool Account Settlement System

o Establishment of Communication Media

o Submission of Compliance

o Action Plan for launching Commercial Implementation

• As per the Hon’ble commission’s order No 3 of 2010, Intra state ABT is fully implemented with all its commercial aspects w.e.f. 5th April 2010.

7.13.3 Procurement of Energy from Renewable Sources Regulations

• In this regard, the Gujarat Electricity Regulatory Commission has passed the regulation for promoting the sale of power from renewable energy sources to any person and for procurement of energy from renewable sources by distribution licensee within the State of Gujarat.

• Further the regulations apply to the following:

Distribution licensee Any other person consuming electricity o Generated from conventional Captive Generating Plant having capacity of

5 MW and above for his own use and / or o Procured from conventional generation through open access and third-

party sale

• Each distribution licensee shall purchase electricity (in kWh) from renewable energy sources, at a defined minimum percentage of the total consumption of its consumers including T&D losses during a year. Similarly, Captive and Open Access user(s) / consumer(s) shall purchase electricity (in kWh) from renewable energy sources, at a defined minimum percentage of his/her total consumption during a year.

• The defined minimum percentages by GERC are given below:

Year Total Wind SolarBiomass/ Bagasse

2010-11 5% 4.50% 0.25% 0.25%2011-12 6% 5% 0.50% 0.50%2012-13 7% 5.50% 1% 0.50%

Renewable Purchase Obligation (RPO) (%)


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7.13.4 Different Orders on determination of tariff for renewable sources of energy Wind Power Gujarat Electricity Regulatory Commission (the Commission) has determined the price for procurement of power by Distribution Licensees in Gujarat from wind energy projects.

• The Commission has determined the tariff for generation from new wind energy project at Rs.3.37 (constant) for its entire project life of 20 years i.e. from the first year to the twentieth year.

• This tariff rate shall be applicable for purchase of wind energy by GUVNL/Distribution Licensees for complying with the purchase obligation that may be specified by the Commission from time to time.

• This tariff will be applicable to wind energy generators who commission brand new wind energy plants and equipments after the date of this order. Old/second hand equipment will not be accepted.

• Those WEGs being set up exclusively for sale to distribution licensee will be eligible for the tariff framed by this order from the date of this order and in accordance with the Regulations.

• However, the Commission will consider the question of enhancing the percentage obligation from time to time. Those WEGs being set up for self use and which have not opted for the benefits under the Wind Power Generation Policy–2002 will be covered by the provisions of this order after 20th June 2007.

Baggasse Based Co-generation The Gujarat Electricity Regulatory Commission (the Commission) has determined the price for procurement of power by Distribution Licensees in Gujarat from bagasse based cogeneration projects.

• The Commission has determined the tariff for generation from bagasse based cogeneration project at Rs. 3.00 (constant) for its entire project life of 20 years i.e. from the first year to the twentieth year.

• This tariff rate shall be applicable for purchase of such energy by GUVNL/Distribution Licensees for complying with the purchase obligation that may be specified by the Commission from time to time.

Biomass Gasification The Gujarat Electricity Regulatory Commission (the Commission) has determined the price for procurement of power by distribution licensees in Gujarat from biomass gasification based generation projects.


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• The Commission has determined the tariff for procurement of power from biomass gasification based generation project at Rs. 3.08 (constant) for its entire project life of 20 years i.e. from the first year to the twentieth year.

• This tariff rate shall be applicable for purchase of such energy by GUVNL/Distribution Licensees for complying with the purchase obligation that may be specified by the Commission from time to time.

Solar Energy The Gujarat Electricity Regulatory Commission (hereinafter referred to as “the Commission”) determines the tariff for procurement of power by Distribution Licensees in Gujarat from Solar energy projects.

• The levelised tariff including RoE of Solar PV power generation, using a discounting rate of 10.19% works out to Rs. 12.54 per kWh and levelised tariff using the same discounting factor for Solar Thermal Power generation works out to Rs.9.29 per kWh.

• However, the Commission felt that it would be appropriate to determine tariff for two sub-periods: 12 years and 13 years instead of the same tariff for 25 years.

• Hence, the Commission determined the tariff for generation of electricity from Solar PV Power project at Rs.15 per kWh for the initial 12 (twelve) years starting from the date of Commercial operation of the project and Rs.5 per kWh from the 13th (Thirteenth) year to 25th (twenty fifth) year.

• The Commission also determined the tariff for generation of electricity from Solar Thermal Power project at Rs.11 per kWh for the initial 12 (twelve) years starting from the date of Commercial operation of the project and Rs.4.00 per kWh from the 13th (Thirteenth) year to 25th (twenty fifth) year.

• The above tariffs take into account the benefit of accelerated depreciation under the Income Tax Act and Rules. For a project that does not get such benefit, the Commission would, on a petition in that respect, determine a separate tariff taking into account all the relevant facts.

• This tariff rate shall be applicable for purchase of solar power generation by Distribution Licensees and other entities for complying with the renewable power purchase obligation specified in the relevant Regulations of the Commission from time to time. This tariff will be applicable to solar power generators, who will commission brand new solar energy plants and equipments during the control period applicable for this order.


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7.13.5 Designating State Nodal Agency for REC Regulations

In exercise of the powers conferred under Regulation 6 (a) of the Gujarat Electricity Regulatory Commission (Procurement of Energy From Renewable Source) Regulations (Notification No 3 of 2010) the Gujarat Electricity Regulatory Commission designated the Gujarat Energy Development Agency (GEDA) as the State Agency for the purposes of the Procurement of Energy From Renewable Sources Regulations (Notification No 3 of 2010). State Nodal Agency will act as the agency for accreditation and recommending the renewable energy projects for registration and to undertake such functions as may be specified under the Electricity Act 2003. State Nodal Agency shall be responsible for accreditation of RE generators, certification of RE in consultation with SLDC for the purpose of issue of REC.

7.14 Key Provisions

7.14.1 The key provisions of the EA 2003 and other policy enablers which have thrown up opportunities as well as challenges to UGVCL are:

• Parallel License

• Introduction of Open Access

• Renewable Purchase Obligation

• Multi-year Tariff Regime

While there a number of enablers in the environment for growth opportunities, there are also challenges that would need to be analysed, along with the inherent strengths and weakness of UGVCL to consider the future outlook of the Company.


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8. Market Issues and Challenges

The power distribution business environment would throw up a number of market-related issues and challenges which needs to be evaluated by UGVCL. Some of these issues and challenges are as follows:

8.1 Open Access

Allowing open-access in the distribution segment and ensuring options for the end users are key strategies to develop a competitive power market in India. As per Electricity Act 2003 and GERC Regulations, it has mandated to distribution licensee to implement non-discriminatory Open Access resulting in loss of subsidising category of consumers. The current class of HT consumers who intend to source electricity under the Open Access route are the subsidizing consumers for the licensee, as and when such consumer avails Open Access, the Distribution licensee encounters an instantaneous revenue shortfall. However, by identifying cross subsidy surcharge and additional surcharge, on account of laying a wire network and related infrastructure to supply electricity to the consumer, the prospective OA applicant would share the burden of cross subsidy that is built in his tariff.

GUVNL on behalf of Distribution Companies in Gujarat, have tied-up its future requirement of power by entering into long term contracts with GSECL, CGS and under the UMPP/Case-1 route. By tying-up long term PPAs, the Discoms are obliged to pay the capacity charges for all such power and in case of shifting of any big HT consumers through open access will result in fall in demand and have impact on financial whereby DISCOM will have to pay for capacity charges without consuming power.

UGVCL submits that the electricity entities have heavy responsibility to meet the needs of agricultural consumers and small domestic consumers at a lower rate than the average cost. Consumers who are currently the HT consumers and commercial consumers paying a higher tariff are providing the means to do this. If such consumers walk away from Grid supply, subsidy from Government will have to increase. The correct position would depend on the situation regarding relative tariff of the different consumers, the possible rates of growth of category wise consumption and the potential for purchasing additional power at low rates in the future.


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8.2 Parallel license

As per the Electricity Act 2003, a parallel licensee is possible to be operated whereby two licensees are supplying power in the same specified area. In the case of UGVCL, due to amendment in the Electricity Act 2003, SEZ became the Distribution Licensee for the SEZ area whereby UGVCL is supplying power. It might also be possible that in future, other distribution licensee may get an approval to supply power in UGVCL area. In that case, there is a likelihood that the urban areas may witness competition due to parallel distribution licensees as these areas witness relatively less distribution losses and are marked by the non-existence of agriculture consumers and a willingness to pay on the part of their regular consumers resulting in cherry picking of area by such parallel licensee. The major issue is that the existing licensees are already locked in long term power purchase contracts with fixed costs to be paid irrespective of off-take by these licensees. In view of this, the migration may lead to a situation wherein the average power purchase cost is pushed upward by the fixed costs flowing from the PPAs and thereby further aggravating the situation with respect to the consumer level tariffs of the existing licensees, leading to further migration.

Already, Torrent and Kandla has a distribution license within the State. There is a risk of them entering the UGVCL Distribution license area and apply for parallel license. The existing case of parallel license is already there in Mumbai and Jamshedpur.

8.3 Regulatory Provisions:

Risk Analysis of power distribution assets on behalf of a large power generation company, including analysis of regulatory framework and regulatory risks, performance benchmarks/ alternative performance based regulation, contractual risk with respect to shareholder’s agreement, acquisition and the loan agreement are part of statutory and regulatory risk. Also, Pricing of Open Access Surcharge, wheeling charges and methodology for tariff determination, all of which will determine the total cost of served power is also one of the Regulaotry risk for distirbution utility.

8.4 Industry Risk and Competition:

The industry risk assessment is driven by appreciation of the overall demand-supply scenario of power and of the overall policy environment within which entities operate. Weaker generation or transmission entities, may hinder smooth funcitoning of the downstream license in a conventioal set-up.


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The opening of sector reform and electricity markets has already lead to open access where UGVCL could procure cheapest power if available as well as consumers can also avail the cheapest power from any other alternate sources. This will shift the balance of power towards better performing distribution licensees, who generate a higher quantum of cash from operations and are in a better position to service their obligaitons towards the generation and transmission licensees.

UGVCL will face the challenge to retain its market share in the face of competition. The flight of HT Consumers of UGVCL to Traders and other generators through open access or parallel licensing could lead to reduced load of “subsidizing” consumers, impacting the sector cash flows.

8.5 Renewable Purchase Obligation (RPO)

8.5.1 The Electricity Act, 2003, mandates the State Electricity Regulatory Commissions to promote cogeneration and generation from renewable energy sources by providing suitable measures for connectivity with the grid, and also to specify for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee.

8.5.2 The National Action Plan of Climate Change (NAPCC) has set the target of 5%

renewable energy purchase for FY 2009-10 which will increase by 1% for the next 10 years. The NAPCC further recommends strong regulatory measures to fulfil these targets.

8.5.3 In this regard, the Gujarat Electricity Regulatory Commission has passed the

regulation for promoting the sale of power from renewable energy sources to any person and for procurement of energy from renewable sources by distribution licensee within the State of Gujarat.

Further the regulations apply to the following:

Distribution licensee Any other person consuming electricity

o Generated from conventional Captive Generating Plant having capacity of 5 MW and above for his own use and / or

o Procured from conventional generation through open access and third-party sale


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Each distribution licensee shall purchase electricity (in kWh) from renewable energy sources, at a defined minimum percentage of the total consumption of its consumers including T&D losses during a year. Similarly, Captive and Open Access user(s) / consumer(s) shall purchase electricity (in kWh) from renewable energy sources, at a defined minimum percentage of his/her total consumption during a year.

8.5.4 The defined minimum percentages by GERC are given below:

Year Total Wind SolarBiomass/ Bagasse

2010-11 5% 4.50% 0.25% 0.25%2011-12 6% 5% 0.50% 0.50%2012-13 7% 5.50% 1% 0.50%

Renewable Purchase Obligation (RPO) (%)

8.5.5 Given that the RPO for 2012-13 will continue after that until the regulation is modified, Torrent Power India has become the first power generator to invite Expression of Interest to supply Renewable Energy.

The company has a current generation capacity of 1647.5 MW and hence requires about 82MW equivalent of generated renewable energy capacity. This kind of policy enforcement and regulation with penalty clauses as intended by GERC will provide the much-needed impetus for the RPO market to flourish in India and provide an incentive for RE power producers.

8.5.6 The states having high or moderate RE potential would drive the development of RE

power in coming years. However, considering Gujarat and its huge potential and upcoming plans for wind and solar energy generation, there would be enough installed capacity to meet the RPO norm mandated by the Hon’ble Commission.

8.5.7 Renewable Energy Certificate (REC) mechanism which could go a long way in

enabling states deficit in renewable potential to meet their obligations while encouraging developers to set up generation facilities based on renewable sources in most optimal locations.

8.5.8 REC mechanism provides an excellent tool to ensure that all states contribute in the

development of RE based power & hence fulfill their RPO.


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8.5.9 With the REC mechanism in place, a regional level forecasting of RE sources and targets/transfer of RE power could be considered.

8.5.10 Other form of RE technologies like biomass based stations could provide stability and

increase the overall Capacity Utilization Factor (CUF) of RE technologies. 8.5.11 REC mechanism offers the potential to expand the market for renewable by

broadening the availability and scope of power products which are available to customers.

8.5.12 If the Obligated Entity fails to comply with the RPO target as provided, it has to pay

RPO regulatory charges which are equivalent to the highest applicable preferential tariff during the year.

8.6 Impact of DSM Regulations

Every Distribution Licensee shall make DSM an integral part of their day-to-day operations, and undertake planning, designing and implementation of appropriate DSM programs on a sustained basis. Distribution Licensees may recover all justifiable costs incurred by them in any DSM related activity, including planning, designing, implementing, monitoring and evaluating DSM programs, by adding these costs to their Annual Revenue Requirement to enable their funding through tariff or by implementing programs at the Consumers’ premises that would attract appropriate Return on Investment.

8.6.1 All such DSM related activity/ programs undertaken by the Distribution Licensees needs to be ─

• Cost effective for the consumers’ of the Distribution Licensees as well as to the Distribution Licensees themselves;

• Protect the interest of consumers and be implemented in an equitable manner;

• Result in overall tariff reductions for all the consumers of the licensees;

• The benefits which an utility will get are: o Avoided power purchase cost; o Sale of saved energy to industrial consumers;

8.6.2 There are 3 main categories of utility DSM programs viz-

Energy Conservation Program: This is intended to be achieved by using


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equipment with improved efficiency, building and industrial processes. Load management Programs: This is achieved by redistributing energy demand

to spread it more evenly i.e. load shifting program offering time of use tariff and interruptible power tariff rates etc.

Strategic Load growth program: Programs that uncover cost effective electrical technologies that operate primarily during periods of low electricity demand. o In terms of saving of Million Units (MUs), the agricultural pump sets have the

highest potential o Maximum leverage is possible in the Domestic sector i.e. by investment of

lowest capital as the maximum savings are possible in domestic lighting; o Savings in domestic and agricultural sector shall not only avoid power

purchase cost but shall also reduce subsidy burden on state Government; o Promotion of incentive schemes for agriculture consumers for implementing

energy efficiency/DSM through Kisan Melas & road shows; o Develop proposals for sale of energy efficient pump sets & accessories at

discounted rates; o Rebate in energy charges for agricultural consumers on installation of energy

saving devices including start labelled pumps; 8.6.3 Implementing Time of Day (TOD) Tariffs: All utilities should introduce TOD tariffs for

large industrial and commercial consumers to flatten the load curve. 8.6.4 Improving efficiency of Municipal Water pumping: Institute measures that

encourage adoption of efficient pumping systems and shifting of pumping load to off-peak hours.

8.6.5 Activities to be carried out by the Distribution Licensees: Load research & consumer survey; Load forecasting at aggregate system level, segment level and end-use level; Conduct of DSM and Demand Response Potential Studies, also including

relationship with Integrated resource planning (IRP) exercises; Setting short- and long-term DSM targets (e.g., kWh, MW); DSM Programmes, Portfolio and Plans preparation, documentation, routine

monitoring and Regulatory reporting; Preparation of Annual work-plan for DSM Programmes, Portfolio and Plans; Preparation of annual DSM Budgets; DSM programme level dispute resolution; Development of DSM related centralised information system and database to aid


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DSM planning, programme design and cost assumptions; Inventory of DSM programmes, costs and achievements; DSM measure wise estimation of deemed savings, costs and timing; Avoided costs – generation, transmission and distribution; Research and analysis in support of DSM plans; Any other items that may be deemed important by the Commission to support

DSM activities in the State;

8.7 Intra-State ABT implementation – UI Implication

GUVNL submitted a petition to GERC the combined power system operations of four subsidiary distribution licensees of GUVNL for the purpose of operational efficiency, load management and applicability of UI charges. This will enable distribution licensees to maintain uniformity in supply of power across the state, to ensure offtake of power at economical rates, following state level merit order discipline, to reduce the UI implication on account of differential rates of UI on underdrawl and overdrawl of power, to maintain uniform retail tariffs in the State and for better compliance of ABT Orders and Regulations. It was specified that the total capacity tied up by GUVNL for four distribution licensees and allocation made by GUVNL to them are normally sufficient to meet their combined power requirements. However, on account of variation in their individual / respective demand during the day period and changes in consumer mix, load requirement, geographical condition etc., distribution licensees are facing operational difficulties, whereby some distribution licensees are having surplus power and others are facing shortage of power, although the total demand of four distribution licensees may be less than or equal to the available generation at that point of time. In such situation some distribution licensees are required to pay higher UI charges for over drawl, leading to uneconomical operation and procurement of electricity at a higher rate. Some of the generating stations are required to back down their operation of existing cheaper generation due to low demand of distribution licensees who are purchasing electricity from such generating stations.


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Due to steps undertaken by SLDC sometimes to back down generation plant, this results in un-equal power supply amongst the four subsidiary distribution licensees, which creates anomaly. Therefore, a request was made to consider uniform entities for consideration of load forecasting, scheduling and drawl of energy of distribution licensee of erstwhile GEB for operational efficiency. The same was not maintainable by GERC and therefore, distribution licensee will be considered as a separate independent legal entity for ABT implementation. Therefore, a proper planning and scheduling of power needs to be undertaken by GUVNL / DISCOM to avoid any penalty under intra-state UI.

8.8 Universal Service Obligation

The Company is obliged to supply power to all. Gujarat Discoms have very large distribution networks and cover large geographic areas. New connections to remote areas are expensive and maintaining reliable supply levels are difficult. These features tend to increase technical losses and the costs of operation and maintenance. Government of India should extend Universal Service Obligations criteria to the new market entrants to prevent “cherry picking” of subsidizing customers.

8.9 Power Purchase Responsibility

The Company may require contracting power directly from generators to have direct control over its cost of power purchase and to seek out low-cost power source as well as to meet the RPO as specified by GERC.

8.10 Market Penetration and service area

The widespread distribution network of UGVCL and the retail reach of such infrastructure would be key discriminators of a licensee’s market position. Usually a distribution licensee used to operate in exclusive zones which however are now allowed by any other distribution licensee or a franchisee. Although the mix of customers within a service area and their purchasing power are important considerations, the service quality and reliability offered by a distribution licensee are important determinants of the sustainability of such a relationship. While the market may be ready to offer a price premium for a more responsive and reliable


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licensee, the latter has to maintain this value proposition for the premium to be sustainable.

The growth of a lower paying customer segment and shifts in better paying customer segments are the trends that needs to be factored while undertaking the market assessment.

8.11 Cost to serve against average Realization

With the advent of the Electricity Act 2003 and various policy initiatives thereof, it has now become mandatory for the Electrical utilities to gradually reduce the cross subsidy and move the tariffs in the State towards the “Cost of Supply”. Traditionally, in the Indian context, tariffs for domestic and agricultural consumers have been heavily subsidised either by the state through subsidies and subventions or through cross subsidisation by other consumer categories, primarily the consumers using electricity at high voltages.

As per Section 61 (g) of Electricity Act, 2003,

“the tariff progressively reflects the cost of supply of electricity and also, reduces and eliminates cross-subsidies within the period to be specified by the Appropriate Commission;”

Figure 17: State wise Average Cost of Service Vs Realization


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8.11.1 Above graph depicts the average cost of supply of several state owned utilities. The cost to serve the agricultural comnsumers is the highest but here in case of UGVCL which has the highest agricultural consumer base, cost of supply is lowest because of the power purchase cost being decided by GUVNL. Hence the utilities with high subsidizing consumers should be given the authority to purchase power on their own so as to lower their power purchase cost.

8.12 Rationalization of tariffs to retain HT & large Consumers

It has been widely recognised that rational and economic pricing of electricity can be one of the major tools for energy conservation and sustainable use of ground water resources. In terms of the Section 61 (g) of the Act, the Appropriate Commission shall be guided by the objective that the tariff progressively reflects the efficient and prudent cost of supply of electricity.

So far the practice being followed in fixing the tariff rates for various categories of consumers is based on cost of the supply at consumer end, the capacity of the consumer to pay and the socio economic policy of the government. Hence the slab rates are so designed that the affluent customers are paying more and economically weaker consumers paying less for their consumption. Thus there is cross subsidisation between various categories of consumers and within a particular category of consumers itself.

Currently, a highly complex tariff structure is in operation and an imbalanced pricing leading to cross subsidisation is in force. The rationalization of tariffs is required simplify the structure and introducing cost reflective tariff by way of retaining the high end customers. UGVCL has to move to a direction to align tariff to cost and moving towards the reducing of cross subsidy prevailing in the system.


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Table 20: UGVCL’s Cost of Service and Average Realisation

ParticularsTotal Cost (Rs/Kwh)

Average Realisation (Rs/Kwh)

Gap (Rs/Kwh)

Low TensionDomestic 4.70 3.57 1.13 Commercial 3.98 5.66 (1.68) Industrial Low & Medium Voltage (Ind. LT) 3.84 5.44 (1.60) Street Light (Public Lighting) 4.43 4.06 0.37 Irrigation Agricultural 3.78 2.56 1.21 Public Water Works & Sewerage Pumps (PWW) 3.28 3.49 (0.21) High TensionIndustrial High Voltage (Ind. HT) 3.26 5.34 (2.08) Industrial High Voltage (Ind. EHT) - - - Railway Traction 3.28 6.18 (2.90) Licensees - - - TOTAL 3.73 3.12 0.61

Domestic and agricultural consumers typically require the highest per-unit cost of service due to low load and remoteness, while HT and large consumers require least cost per unit to serve. Furthermore, agricultural consumers, who have a low load factor, tend to require higher peak capacity while total energy consumption remains low.

8.13 Standards of Performance (SOP’s)

Supply distribution licensee shall be the sole interface to the consumer and therefore responsible for adherence to SoP relating to the period of giving supply, quality of supply (voltage, harmonics), system of supply, restoration of supply, restoration in burnt meter cases, reconnection on payment of amounts due. In order to provide non-discriminatory access to the wires, the wheeling distribution licensee should not discriminate between changed-over consumers and its own consumers for provision of wheeling services.

8.14 Operating norms – Regulated by SERC

Distribution Licensee have a direct interface with the customers and hence have to develop necessary process, credit guidelines, billing systems and collection mechanisms to ensure that the business is run efficiently. Operating efficiency will impact the MBC cycle which would affect cash flows.

Also the actual cost of power (Procured through internal or external sources), within


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approved tariff structure and allowed T&D Losses. Efforts are constantly required to track energy flows in the system to ensure that all the energy being input in the T&D system is also billed after accounting for technical losses.

Man-power productivity parameters and other administrative expenses will also need to be closely tracked and assessed in relation to regulatory forbearance.

8.15 Future Market Operations and financial positions

The future assessment is based on the aspects in the business environment including the regulatory stance, changing market conditions, differential growth rates of various consumers, tariff levels and growth orientation, all of which would translate into the financial projections and performance.


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9. SWOT Analysis

The strength and weakness of UGVCL aims at assessing the company’s performance in vital areas such as Human resource management, operation efficiency, financial management, MIS and IT. The opportunities and threats have been identified after analyzing the business environment, potential competition and the issues and challenges that face the company in a dynamic environment that is evolving rapidly and will continue to do the same in the foreseeable future. The company’s business environment has been analysed in terms of sector reform and regulations under EA 2003 and GERC regulations.

9.1 Background

9.1.1 As a part of the development of strategic plan for the business, it’s necessary to understand the inherent competitive advantage of the company as well as the risk surrounding the business environment. Like any other business, it is very important for UGVCL to evaluate the environment – both internal and external while charting out its growth path. The aim of any SWOT analysis would be to identify the key internal and external factors that are important to achieving the objective of the company. The SWOT analysis is a strategic planning technique used to assess the internal and external environment in which the company operates and competes. These come from within the company's unique value chain. The information being used for the SWOT analysis is grouped into two main categories:

• Internal factors – The strengths and weaknesses internal to the organization;

• External factors – The opportunities and threats presented by the external environment to the organization;

9.2 Strengths

9.2.1 Experienced workforce

The strength of UGVCL lies in the fact that it has about 7000 technically qualified and skilled employees. The workforce comprises of 60% technical staff and is trained and experienced to handle the distribution network of UGVCL. The workforces are spread over a wide geographic area of North Gujarat as well as adept at handling rural and urban area consumers. This experience can also be useful in future ventures for doing O&M activities, training, consultancy etc.


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9.2.2 Healthy growth in Sales

UGVCL is the distribution licensee for North Gujarat except for Ahemdabad licensed area. North Gujarat is one of the leading industrialised area in Gujarat having a large number of industrial belt and urban population. This in turn translates for high industrial, Commercial and residential consumption for UGVCL. Also, there has been a steady growth in sales in the last few years which indicated that UGVCL can achieve better turnover and in turn better profitability in future.

9.2.3 Novel Initiatives for performance improvement

UGVCL is catering almost 24.50 Lacs of consumers with an obligation to provide a quality supply. To achieve the given objective, UGVCL has tried to provide satisfactory services to such a large consumer base and have initiated novel approaches which are highlighted as below:

• Technical Loss reduction Activities are planned as under: o Proper maintenance & replacement of conductor & cables with proper size. o Providing amorphous transformers & balancing load on each phase along

with bringing transformer in load centre. o Providing proper earthing to HT poles and transformers & minimize current

on neutral of transformers. o Improving power factor of feeder by HT capacitor. o Improving power factor of feeder by APFC panels & LT capacitors. o Bifurcating all required feeders along with review of allowable norms of

bifurcation for AG feeders & minimize all joints in lines etc.

• Commercial Loss reduction Activities are planned as under: o Energy audit of DTC losses considering commercial/theft parameters. o Providing Arial bunch conductor/insulated conductor/XLPE cable & armoured

services. o Replacing services having joints, provide meters outside the entrance of

premises. o Replacing meters by static meters. o Replacing all faulty/burnt meters & making all installation pilferage proof. o Providing XLPE coated conductor at all crossing of rural feeders etc

9.3 Weaknesses

9.3.1 Ageing distribution Infrastructure

The distribution network of UGVCL is quite old and requires regular repairs and


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maintenance putting additional financial burden. Most of the network in the urban areas is overhead network which is susceptible to the onslaught of environment. In the coastal areas and hilly areas the corrosion effect is very prominent. Thus, an ageing infrastructure leads to issues increased breakdown, frequent maintenance and increased expenses for repairs and maintenance.

9.3.2 High incidence of unmetered agriculture consumers

Agriculture consists of around 55% of the total consumption of UGVCL and a large part of the agriculture consumption is unmetered (~82%). The unmetered agriculture consumption and low collection from this category impacts the revenue of UGVCL.

9.3.3 Ageing employees

The UGVCL has an ageing employee profile with the average age of employees being around 42+ years. This is a worrisome factor with UGVCL looking for major capital expenditure of its network and could lead to operational issues in the near future.

9.3.4 Planning of Manpower Requirement

Recruitment, in the past has been done in a haphazard manner, leading to manpower shortages during periods when a lot of people retire and also resulting in insufficient knowledge transfer to the new employees. This situation is being remedied as of now with a more systematic approach to recruitment.

9.3.5 Commercial arrangement In the existing scenario, GUVNL allocates power & the power purchase cost among the four Discoms based on the consumer mix of each utility. Also the tariffs for the consumer categories across all the four Discoms are similar. The Discoms should be given authority of purchasing power from outside in order to lower their respective power purchase cost. In case the Discoms independently procure power from generating stations, they would require flexibility to charge tariff’s from consumers that reflect the power purchase cost of individual Discoms in order to maintain their profitability in the business.

9.3.6 Irrational Tariff Structure

In a competitive market scenario, the ability of a state to attract industries would depend on its competitiveness in cost of power. Hence to rationalize the tariff, the tariff of each category of consumer has to be brought closer to its cost of supply.


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9.4 Opportunities

9.4.1 Public Private Partnership

UGVCL has the option to get equity financing for new projects through the Public Private Partnership (PPP) route by establishing a Joint Ventures (JVs) or by creation of SPVs with suitable private sector partners. This will also leverage private sector efficiencies for speedy and cost effective implementation of the projects. UGVCL could take advantage of the change in the market characteristics by leveraging its substantial operational experience in forging new JVs and business associations with private sector companies which will have the financial resources. Some of the areas where the public private participation can be attempted.

• Distribution Franchisee in high distribution loss area;

• Partner with any local authority, Panchayat Institution, users' association, co-operative societies, non-governmental organisations who intends to generate and distribute electricity in a rural area as specified in Section 13 and 14 of the Electricity Act 2003

• O&M contracts;

• Distribution Infrastructure under Turnkey projects

• Renewable Energy Projects;

9.4.2 Non-Conventional Energy

Considering the RPO issued by SERC / CERC and State Government initiative to harness the green energy, many activities has been initiated at the State level to develop the green project. Considering the importance of the renewable sector and the necessity of such power for the system and economic development of the State, UGVCL can tie up with the generator for commissioning of such plant and have a full capacity tie-up or can on its own develop such project.

9.4.3 Infrastructure upgradation

As envisaged in the Capex Plan, UGVCL has planned for upgradation and strengthening of distribution network with viable funding plan. UGVCL planning to to have a distribution system to withstand future load, provide quality and reliable supply and reduce system losses. This will result in increase in sales and decrease in the cost resulting in high revenue.


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9.4.4 IT Initiatives

UGVCL has opportunity to undertake a number of technological initiatives to improve performance especially in terms of better consumer services. Implementation of ERP, extended use of spot billing for consumers and for Feeder and DTC meters are some of the initiatives that can be undertaken to help improve efficiency.

9.4.5 Competitive bidding

Section 63 of the Electricity Act promotes the transparent process of bidding for procurement of power by the Distribution Licensees and subsequently, bidding guidelines have been issued by the Ministry of Power for long term procurement of power. Also, MoP has specified that distribution licensee has to procure power through bidding process from January 2011. UGVCL can through this process identify bidders across the country to source long term power for its licensed areas.

9.4.6 Ancillary Services and CDM Benefits

UGVCL can in future look at other services relating to Operations & maintenance activity, Testing facilities, Research & Development, Training, Technical consultancy, etc. There is a need to introduce R&D activities relating to International Technology trend, effect of use of advance technology in distribution, etc. This can be useful to improve the overall efficiency of the operations as well as helpful for Training of employees. UGVCL can also undertake training programs at its training centres for other utilities which can earn revenue for UGVCL. UGVCL in future can utilize the skills of their experienced technical persons in providing consultancy services to third parties who are interested or already involved in the Distribution segment of the power sector. UGVCL has capable staff for handling O&M activities of a distribution project as well as providing the project management assistance. There are many new entrants in the power sector who would be interested in distribution projects for the first time or companies that do not have the required expertise to handle such activities on a large scale. UGVCL can undertake such O&M activities and enhance its revenue earning potential. This can have a two-fold advantage of helping UGVCL with an extra revenue stream as well as giving exposure to newer technologies that might be adopted by private firms at new and upcoming projects.

According to the methodologies specified by United Nation for Climate Change Convention (UNCCC), the CDM benefits can be claimed by implementation of Energy efficient measures for T&D loss reduction which will include:


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• Up-grading the voltage on distribution system;

• Replacing the existing transformers with a more efficient transformers;

Also, other CDM project will include Energy Efficiency measures, implementation of CFL, rural electrification project using solar panels, etc.

9.5 Threats

9.5.1 Deemed license to SEZ areas

The Central Government have issued relevant policies such as SEZ Policy and Guidelines for Power generation, transmission and distribution in SEZ, where in it has stated that it is the prime responsibility of the developer to provide quality and continuous power supply to the consumers in their area. As per the Ministry of Commerce and Industry notification dated 3rd March 2010, it stipulates that a developer of SEZ shall be deemed to be a distribution licensee under clause (b) of Section 14 of EA 2003. These developments are a threat to UGVCL as SEZ areas are areas of growth and revenue potential and to that extent would be out of bounds for UGVCL.

9.5.2 Parallel license

Maharashtra and Jharkhand are few states in the country where parallel license is prevalent. Based on the judgement of the Supreme Court dated 8th July 2008 and the interim issued by the Hon’ble Commission dated 15th October 2009, Tata Power Company (TPC- D) is a distribution licensee in Mumbai area except Mira Bhyander, which already has REL D and BEST as the distribution licensees. Similar arrangement in Gujarat may be considered as a Threat for UGVCL. While, there are issues of separation of wires and supply business, tariff related issues, operational issues etc, there is an inherent threat to UGVCL where it could lead to cherry picking of its urban areas.

9.5.3 Non Discriminatory Open Access

With the opening of the power sector and the option available for consumers to get uninterrupted power through open access, there is a distinct possibility of the consumers, especially industrial consumers who have paying capacity to opt for other source of power. This could have an adverse impact on UGVCL as it will not only directly impact the revenue, but also affect the ratio subsiding consumers to


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subsidised consumers. This implies that the cross-subsidising consumers would reduce and further burden will increase on the rest of the consumers.

9.5.4 Regulatory Risks

UGVCL as a distribution licensee is regulated by GERC and has to approve the regulatory norms as well as to recover the cost from the consumers and directly affects the liquidity position of UGVCL. The tariff decision is under the purview of GERC whereby the regulations provide for most cost to be on a pass through basis along with a reasonable return on equity component, the regulatory risk emanates from the fact that GERC impose stricter performance standards or disallow certain cost components that have resulted from the distribution licensee’s inefficiencies.

9.5.5 High Sensitivity to Operational Variations

In the regulated regime, UGVCL is only entitled to ROE and with a small equity base it means that any operational swings can adversely affect the financial condition of the company. Any disallowance by GERC will led to heavy borrowing for carrying out the operations of the company. Also, disallowances of expenses by the Hon’ble Commission have an impact on the profitability of the company and the company does not have any other mechanism to recover these costs given the regulated nature of the business.

Helpful

In achieving the objective Harmful

In achieving the objective

Inte

rnal

Ori

gin

Att

ribu

tes

of th

e O

rgan

isat

ion

STRENGTHS

Experienced Manpower

Technical expertise

Healthy growth in sales

Novel Initiatives

WEAKNESS

Ageing distribution Infrastructure

Unmetered Agricultural consumers

Ageing Employees

Planning of Manpower requirement

Irrational tariff structure

Exte

rnal

Ori

gin

Att

ribu

tes

of

the

Envi

ronm

ent

OPPORTUNITIES

Public Private Partnership

Infrastructre Upgradation

Non conventional energy

Ancilliary Services

IT Initiatives

Competitive Bidding

THREATS

Non Discriminatory Open Access mandatory

Regulatory Risk & inconsistencies

SEZ license Area

Operational variations


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9.6 Summary of SWOT

UGVCL has the advantage of having a large engineering base, but at the same time there are also issues like a large number of retirements due within the next few years. Another issue which UGVCL has to focus on a continnuous ongoing basis is the upgradation of its existing network and updation on the technological front to cater to consumers needs. The T&D losses have to be reduces to match the international standards or atleast the standarand of the neighbouring Utiltites such AEC and SEC and theft of electricity should be drastically curbed. In order to be economically viable, UGVCL has to take effective measures to metered all the unmetered consumers.

Regarding risks in the immediate future, the demand supply positon continues to be a major role for the market penetration for UGVCL. With mandatory open access and the thrust on providing choice to consumers through open access and parallel license becoming a reality, UGVCL will need to critically examine its ability to compete with other private players in the market.

Going forward, UGVCL can target to improve its operations.

The growth path for UGVCL would be the key take homes which have emerged from the SWOT analysis. While, there would be opportunities galore on the horizon, it would be only prudent on part of UGVCL to first target the short-comings and overcome them. Simultaneously, it would also be necessary to start identifying areas which it intends to target in the short to medium term and which areas it intends to target in the long term. Targeting everything simultaneously would lead no-where.


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10. Risk Analysis

10.1 Background

10.1.1 It is necessary to understand that how the risks are perceived by the business. Virtually all organisations strive to survive. They strive to create value for their stakeholders including State Government, SERC, Consumers, Financial institutions, etc. They have the mechanism that allows them to respond their existing market environment and to anticipate changes that they may face. The risk can be identified as a financial risk, regulatory risk, operating risk, technology risk, etc. The risks that currently prevail for UGVCL as a whole and the plan undertaken to mitigate are outlined as below:

10.2 Risk Assessment and their Mitigation plans

10.2.1 Improve efficiency

The spirit of the EA 2003 was to introduce competition in the electricity sector and therefore, in order to be competitive on the distribution segment, UGVCL has to improve operational efficiency. The efficiency can be achieved through reduction of losses, quality power supply and upgradation of network. There is also a need to introduce technological initiatives to improve performance and give customer better services both in terms of supply as well as cheaper power. To achieve such efficiency, UGVCL has undertaken following activities:

A. The old and overloaded system often resulted in increase in distribution losses and affected the quality of service to the consumers. The ideal vision of UGVCL is to have a distribution system that runs smoothly: as system that could withstand future load, provide quality, reliable energy supply and reduce losses.

UGVCL have also undertaken major technological initiatives whereby they are planning to provide a quality service to the consumers by way of Implementation of rural electrification schemes, Distribution schemes, System Improvement Scheme, ERP, etc.

A brief description of the above mentioned schemes along with CAPEX is given below:

Infrastructure Plan:


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a) Rural Electrification Scheme: TASP Wells and Petapara: (Government Grant)

• The company undertakes the work of rural electrification in Tribal areas under Tribal Area sub plan financed by the state Govt. for electrification of virgin areas and also extensive electrification in the areas already electrified earlier for providing such electrification facilities in tribal areas. The State Government is providing the financial assistance under TASP scheme. The scheme evolves of electrification of wells and Petaparas for different circles under UGVCL.

• It has been estimated to electrify 3543 nos. of wells during the year 2010-11. The proposed expenditure for this works out to be Rs. 2194 Lacs. While for Petapara electrification it is proposed to electrify 3 Nos. Petapara at estimated cost of Rs. 21 Lacs.

Schedule Caste Sub Plan: (SCSP) (Govt. Grant)

• It has been emphasized that whenever any village is electrified for all purpose, schedule cast localities and other backward areas of main village and surroundings are also covered. For such electrification of schedule cast localities, State Government is allocating grant every year for implementing the programme under SCSP scheme.

• It has been estimated that approximate 3043 schedule cast localities of UGVCL shall be covered under this scheme involving for tentative expenditure of Rs. 116.7 Lacs for the year 2010-11. Under this scheme the company undertakes the works of electrification of Ag. wells for schedule cast beneficiaries under Non-Dark Non-TASP area. This scheme is financed by State Govt. During the year 2010-11 it is proposed to electrify 47 Nos. wells at and estimated cost of Rs. 50 Lacs.

Kutir-Jyoti Scheme: (Govt. grant)

• This is also a similar scheme for benefiting the Tribal area. This is the grant scheme to be given by Govt. of Gujarat. It is estimated that 1177 1Ph. connections in Tribal area under Himatnagar and Palanpur circles will be covered under this scheme costing for capital expenditure of Rs. 42.58 Lakhs for the year 2010-11

• Electrification of Hutments (Gen & SCSP): (Govt. grant)


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• This scheme is meant for electrification of hutments in certain slum areas situated in and around Urban and Rural areas with a view to support and help socially, economically and educationally weaker section of society, who are living in the hutments. The scheme involves energisation of single point power supply to the identified beneficiaries in consultation with local body. It has been proposed that during the year 2010-11 to cover about 23304 nos. of Hutments situated in Sabarmati, Mehsana, Himatnagar and Palanpur circles. Expenditure of about Rs. 1487.45 Lacs for the above scheme for the year 2010-11 is proposed.This expenditure will be granted by Govt.

Normal Wells: (own fund)

• As indicated earlier, over and above electrification of wells and Petaparas in tribal areas, normal RE works are also carried out for electrification of wells. It has been estimated that during 2010-11 there will be Rs. 99 Lacs expenditure for electrification of 87 wells.

b) Centrally Sponsored Scheme Rajiv Gandhi Gramin Vidyutikaran Yojna (RGGVY) (90% GOI Subsidy)

• Govt. of India has launched the scheme RGGVY for rural electricity infrastructure and household electrification for providing access to lectricity to all households in five years. The scheme envisages the provision of 66/11kv Sub-station in rural areas, electrification of rural households, intensive electrification of electrified village and habitations, additional distribution transformer centers etc.

• Of the total capital outlay subsidy component is provided at 90%. However for the project to be eligible for capital subsidy under the scheme, prior commitment of the states shall be required for deployment of franchisees for the management of rural distribution under the project. Under such arrangement Non Governmental Organization (NGO’s), user’s Associations, Co-Operative association or individual Entrepreneurs, the Panchayat Institutions would be associated as rural distribution franchisees.

• The Franchisees arrangement could be for system beyond and including feeders from substation or from distribution transformers. The underlying basic purpose would be to prevent the pilferage of power. Considering the scope of work as envisaged in four circles a provisional out lay of Rs. 3528 Lacs has only been estimated for the year 2010-11 for about 58921 Nos. Of connections.


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B. a) Normal Development Scheme (Non-Plan)

Distribution Schemes

The company has to lay distribution lines up to installation of HT/LT consumers which calls for considerable investment for laying HT/LT lines, service connection lines and meters etc. For expansion of distribution system and considering the present year trend of capital expenditure under this head of work System

b) Improvement Scheme (Non- Plan, Non- Grant) Feeder Bifurcation Work :-

• Technical losses mainly depend on Ampere loading and conductor resistance.

• Ampere load of line should be reduced by separating line (feeder bifurcation) or lowering line resistance by enhancing conductor size (conversion of line conductor).

• UGVCL is carrying out feeder bifurcation work under system improvement scheme for improvement of reliability and quality of power supply. Due to feeder bifurcation, consumer end voltage profile is improved. Distribution utility has advantage of reduction in losses and less time to rectify feeder faults. As per general practice in UGVCL, feeder bifurcation is proposed if load of feeder crosses 150 Amp at S/S end under SI scheme.

Providing Amorphous/Star Rated Transformer:-

• Amorphous by name means stack of symmetrical structure or form. Amorphous metal manufacturing process includes rapidly cooling the modern metal at 106

• Celsius per second solidifying into ribbon or step in one step process. This prevents crystallization of metal. Hence there will not be any grain boundaries to impede the magnetic domain moment, a feature that drastically decreases the hysteresis loss.

• To reduce technical losses in urban and semi urban area it is desirable to replace

• CRGO transformer by Amorphous/Star rated transformers as their no load losses are less as compared to CRGO transformers.


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Providing Load Shedding Transformer: To provide 24 hours 1-Phase power supply to the farmers residing in the farm Special Design Transformers (SDT/LST) are provided on 11 KV AG dominant feeders. It is targeted to achieve 100% (other than “0” consumer feeders), SDT installation during the FY 2010-11 & accordingly about 300 pending feeders are targeted to be covered.

Others

Every year new consumers are added to the distribution system and also existing consumers are demanding for additional load in their demand. Hence the system expansion is based on the consumer’s requirement rather than technical requirement. This leads to increase the loading of existing system networks and requires to be improved by renovation of lines (replacement of conductor) and up gradation of system etc.

c) Loss Reduction Project.

UGVCL has planned to expend Rs. 180 Crores, in work for reducing technical as well as commercial loss under loss reduction project to be taken up in different areas of UGVCL, like providing Arial Bunch Conductor, Armored Services, XLPE Coated conductor, Updating of meters, providing Amorphous transformers, Bifurcation of feeders etc.

C.

a) Energy Conservation:

Other New Schemes (Internal resources + grant)

The Energy Conservation measures in the following areas are proposed for implementation. Replacement of existing Ag. Pump sets by Energy efficient pump sets. A project of replacement of existing pump sets of farmers by Energy efficient pump sets to reduce the power demand in Ag. Sector, with this measure it is possible to achieve 10 to 15 % energy saving. This Scheme was meant for Twelve Talukas of UGVCL. The total utilization of fund by UGVCL is Rs. 37.58 Crores. A total of 12929 nos. of EE pump sets were replaced during FY 2009-10.


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HVDS :-

• KHUSHY (Kisan Hit Urja shakti Yojna) is High voltage Distribution system by installing smaller size of distribution transformers and thereby reduction of L.T lines up to negligence level by converting it into HV line. To improve voltage profile in rural area the small capacity of distribution transformers are to be installed by extending 11 KV line as possible as nearer to the load and distribution transformer of the capacity of 10,16 KVA are erected and supply is released to consumer through a short length of LT lines.

• The new Agriculture connections are released by adopting HVDS. To reduce theoretical losses as well as to prevent theft of energy, HVDS System is very helpful. Also it makes quality power supply available to Consumers.

• As per “Golden Goals” for the Year-2008-09, total 5000 Nos. T/Cs were to be converted in to HVDS System. Against which on 5657 Nos. of T/Cs, HVDS has been applied. In year 2009-10 total 1343 nos. of T/Cs (HVDS) installed. In the year 2010-11, 1500 nos. of T/Cs are planned to be provide & its budgetary provision as made by GUVNL is amounting to Rs. 8.68 Crores.

Information, education and Communication ( IEC):

• Mass Awareness of the Consumers:- To create the concept of energy conservation amongst the Consumers, many farmer Camps & Stalls regarding tips of energy conservation were organised during Bhadarvi Poonam and guidance for utilization of energy efficient apparatus was provided. During the Year-2010-11 on the occasion of celebration of “Swarnim Gujarat”, many competition on painting & debates on themes of Energy Conservation of school children were arranged during Urja Shakti Month- Aug-2010. Also, Rally’s were arranged at Corporate and Circle level during Aug-2010 for creation of concept of energy conservation and safety measures amongst the consumers.

• During the FY- 2010-11, the GUVNL has made provision of 60 Lakhs under head of IEC for mass awareness of the consumers and further activities for the same will be carried out during the celebration of Energy Conservation Week. Under the project various mass awareness programmes such as seminars, exhibitions, workshops etc. to bring awareness in all categories of consumers would be arranged


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at different locations throughout the Company from time to time. Under the publicity campaign printing of pamphlets, posters, banners, telecasting of short films on TV, cable net work & on Radio, advertisement in print media, depicting hoarding containing Energy saving messages/ slogans etc. will be carried out.

D. Bhiwandi, a power loom city, also known as the Manchester of India, had typical problems like rampant theft and non-payment. MSEDCL has already opted for a input based franchisee model for electricity distribution as envisaged in the Electricity Act–2003. It handed over Bhiwandi circle to M/S Torrent Power on 26th January 2007. This experiment proved to be very successful and a trend setter in power distribution sector of the country.

Based on this experience, UGVCL may decide to hand over some more loss making areas to private franchisees.

Distribution Franchisee

E. Due to inclusion of Open Access and Parallel License under the amended Electricity Act 2003, a consumer of UGVCL will always have a choice to avail supply of electricity from any other Distribution licences other than UGVCL in case of proper service, continuous power supply or cheap power. This may result in loss of revenue for UGVCL as well as loss of subsidising consumers. Therefore, UGVCL is planning to undertake following measures to mitigate the risk of losing consumers:

Improvement in Consumer Services:

• Implementation of Consumer Facilitation Centres (CFCs) which comprise of a single window system with a help desk for customers. The CFCs accept consumer’s complaints, application forms for new connections, meter change requests and name or address change forms etc;

• UGVCL have Customer care center for the booking online complain of the customer of the company. Four circle have 24 hour customer care center. All center have contact numbers for booking complain on phone. It has following specialities: Single Window Complaint Management System; GIS Equipped; Computerized; Customer will get answers from single window only;


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Person sitting at the Care Center can have the history of particular customer or of Particular Case on the clicks of the computer so he can straight forward, and confidently reply to the customer about the issue;

• Internal Complaints Redressal Units are established whereby Consumers can approach this platform for redressal of their complaints before going in appeal before Electricity Ombudsman.

• A facility is provided to consumer for registering complain through SMS;

F. A key element of the implementation of infrastructure plan is to execute project on a timely manner and is managed in a judicious way. In order to meet the above investment objectives & improving the existing infrastructure of Distribution System, UGVCL needs to review the timely implementation and completion of Infrastructure plan. It has to ensure the Quality Control, as well as there should be a regular monitoring of the progress of the projects. UGVCL has to undertake a comprehensive planning exercise to formulate plans and strategies to achieve these commitments. Therefore, the same can be undertaken by following the outlined measures which will result in an quality output and better infrastructure on a timely basis:

Project Management and Execution

• Design, Development and implementation of an Integrated Project Management Information System;

• Regular monitoring of the progress of the projects and establish a feedback mechanism;

• Training of UGVCL Staff;

• Liasioning with REC/PFC or any financial institution for availing financial assistance;

• Liasioning with GERC;

G. Even though UGVCL has a collection efficiency of 100%, still there are some arrears which need to be targeted and collected. These dues are from Governmental companies. Certain receivables are also on account of issues in metering, billing and collection issues which are required to be tackled by UGVCL on a war footing.

Also additional drives to be planned to be undertaken by UGVCL are as follows:

Recovery of Arrears

• Implementation of pre-paid meters;


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• Disconnection drive : Biggest tool available;

• RCI consumers in Arrears: List to be obtained from IT department;

• ABC analysis to be carried out e.g. there might be 20% consumers having 80 % arrears. Instead of disconnecting 80% consumers with 20% arrears , priority to be for consumers with higher arrears.

H. There is an issue of existing employees leaving the organization, in view of the opportunities available in power sector with the opening of the power sector as well as Man-power planning. It will be difficult for the Company to retain its professional/ technical staff given the budgetary constraints of compensation that it can pay. Moreover it is also not able to attract the best talent in the country for the same reasons.

Employee Motivation

I. In the previous sections UGVCL has cited its vulnerability to regulatory decision making process as an area of concern and the risk related to it. However, it also recognises that this is an area which it will have to proactively deal with to minimise the kind of regulatory risk that it perceives. UGVCL feels that better co-ordination and interaction between the Hon’ble Commission may be helpful in alleviating the situation to a large extent. Further, while it would be the duty of the company to meet the performance levels set by the Hon’ble Commission, it is felt that a more realistic approach has to be adopted by the Hon’ble Commission while fixing the performance parameters. UGVCL is ready to go all out to assist the Hon’ble Commission in the matter as the same would be beneficial for both the company and the consumers who have to finally bear the consequences of the financial implication on the company.

In the rapidly changing power sector scenario and based on the opportunities available in the market, going forward the company is considering to achieve their Vision, Mission and Values as determined in earlier chapters.

Regulatory awareness


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11. Future Business Opportunities

UGVCL being a deemed distribution licensee has an obligation to supply quality and continuous power. In its endeavour to provide the quality power supply, UGVCL has already initiated a plan to revamp the distribution infrastructure to meet the growing needs of the State. Accordingly, GSEC and GUVNL (power allocated by GUVNL to UGVCL), has also simultaneously taken up several capacity addition projects in terms of expansion at existing locations as well as Greenfield projects and some of the renovation and modernisation of its existing units with a view to bring in energy efficiency and life extension. Also, in relation to harnessing the green energy and to meet the RPO as directed by the Hon’ble Commission, UGVCL has to contemplate to tie up the additional capacity in the areas of New and Renewable Energy Sources particularly. UGVCL has already undertaken the robust infrastructure plan and planning to implement with a target to achieve efficiency in operation and to provide quality and continuous power supply to the consumers. To achieve this said objective, challenges in terms of financial and human resources, drive the need for UGVCL to review and realign its strategy based on the availability of the desired resources so as to be able to sustain the desired level of growth and expansion in a competitive environment. It is submitted to the Hon’ble Commission that usually the project funding is in the debt:equity ratio of 80:20 or 70:30 (which is in line with the GERC Tariff Regulations, 2005) whereby the portion of equity used to be contributed by State Government. However, it is necessary for UGVCL to look at alternate sources instead of continued dependence on the support from GoG. In order to raise resources, UGVCL can consider the following options: Equity Financing from Capital Market - Initial Public Offer (IPO); Public Private Partnership - Creation of Special Purpose Vehicles (SPVs) / Joint

Ventures; Also, in terms of business opportunities that UGVCL could target in the future, a

SWOT analysis has helped identify the following: Public Private Partnership (PPP); Renewable Source Energy; Providing Ancillary Services to other power sector players;


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While, the above mentioned Business Opportunities have emerged, the first two related to Public Private Partnership for expansion and Greenfield project, Generation tie-up by focus on non-conventional energy sources and providing other ancillary services would be the focus areas in the short to medium term. Therefore, the other opportunities would be looked at in the long terms which are being detailed out in the following paragraphs. Also, the other areas where UGVCL has to focus on a serious note to target in future to provide the services to the consumers as well as to be rational in collection of charges are as follows:

• Proactive tariff rationalisation;

• Sustained political support;

• Commercial orientation;

• Autonomy of management;

• Commitment to customer service;

• Capacity development in organisations;

• Responsiveness to regulatory directions;

• Improving the data environment;

• Better metering and energy accounting;

• Employee accountability and recognition;

• Focus on efficiency;

11.1 Public Private Partnership

11.1.1 UGVCL has the option to get equity financing for new projects through the Public Private Partnership (PPP) route by establishing a Joint Ventures (JVs) or by creation of SPVs with suitable private sector partners. This will also leverage private sector efficiencies for speedy and cost effective implementation of the projects. Also, the JV partners would be able to bring in other resources, including the ability to obtain statutory clearances expeditiously. The Joint Ventures will be formed with such strategic partners who can bring in the relevant experience, capabilities and expertise in the relevant areas.

11.1.2 The PPP models vary from short-term simple management contracts (with or

without investment requirements) to long-term and very complex BOT form, to divestiture. These models vary mainly by:

• Ownership of capital assets


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• Responsibility for investment

• Assumption of risks, and

• Duration of contract

11.1.3 The desired synergy from the joint venture and suitable bidding parameters will be evolved for the purpose of selecting the JV partner through bidding process. Some of the areas where the public private participation can be attempted.

• Distribution Franchisee in high distribution loss area;

• O&M contracts;

• Distribution Infrastructure under Turnkey projects

11.2 Ancillary Services

11.2.1 UGVCL has lot of in-house capacity available which can be utilised for providing ancillary services to other power sector players. These services can be in the field of providing meter testing facilities, technical consultancy, training, etc. For this purpose, the laboratories and training centres already exist which would be utilised for this purpose. A separate wing may be needed to be created with dedicated manpower and with a focused business development team. The business development team would be responsible for keeping a track of the market as well as identifying new players who might need such services.

11.3 Professional Meter Testing Facility

11.3.1 UGVCL has its Hi-Tech Meter Testing Laboratory at Sabarmati Circle accredited by National Accreditation Board for Testing and Calibration Laboratories (NABL) with ISO/IEC 17025:2005. This facility can be utilised for providing meter testing of other Utilities, Meter manufacturers and other bulk energy consumers.

11.4 Non Conventional Energy

11.4.1 UGVCL in support with GUVNL has to initiate an activity on harnessing renewable source of energy. Right now GUVNL is looking after the non conventional initiatives, but to fructify the plans for significant expansion, a new department/ division under UGVCL might be needed to be created with the aim of harnessing non conventional energy.


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11.4.2 However to meet the Renewable Purchase Obligation as directed by the Hon’ble Commission, UGVCL may consider PPP model for commissioning of the Generation Plant under such source of energy. The main characteristics of PPP is that there is a creation of a Special Purpose Vehicle and the risks in the project are assigned to the party that is best suited to handle the risk. This creates a ‘win-win’ situation for both the participating parties, as the project is delivered on-time within the allocated budget, in contrast to the delays and cost-over-runs in case only the Government undertakes such project. Depending on the risk-allocation, PPP projects can be of many types, a few of them are Build-Operate-Transfer (BOT), Build-Operate-Own-Transfer (BOOT), Build-Operate-Lease-Transfer (BOLT).

11.4.3 Public Private Partnership can get easy and priority-financing by financial-bodies and

can address the major concern of financing of such projects. A PPP also has immunity from changing government-policies, after a fixed policy framework is put in place. It also takes the local community and land owners into confidence and hence avoids running into trouble from their side. The unique characteristic of PPP project is its in-time completion, which avoids cost-overruns. A Public Private Partnership will also have an economically viable tariff plan through ‘Power Purchase Agreement’, thus reducing the revenue-risk in the process. Considering these benefits associated with Public Private Partnership, it is imperative that UGVCL is planning to go for the PPP route in setting up of such renewable power projects.

11.5 Distribution Franchisee Route 11.5.1 UGVCL is one of the best utilities in the country and is independently handling all its

operations except power purchase. It can leverage its skilled man power & experience in the field of distribution & acquire distribution franchisees in areas other than that of Gujarat. It would help the utility to earn extra revenue by utilizing its area of excellence.

11.6 Future Plans in Other areas

To achieve the plan of UGVCL as well as to follow the Vision and Mission in a way to achieve goals, there is a need to strengthen the working of the Organization in order to enable it to implement its future Plans. Therefore, it is required to initiate the development on the Organizational front, namely HR related and Information Technology related.


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11.6.1 I.T. initiatives

R-APDRP The GoI had launched a Scheme for implementation of Re Structured Accelerated Power Development and Reforms Programs. These include establishment of reliable and automated systems for sustained collection of accurate base line data and the adoption of information technology, Consumer Indexing, GIS Mapping, Automatic Metering (AMR) on Distribution Transformers and Feeders, and Automatic Data Logging for all Distribution Transformers & Feeders and SCADA / DMS system, Asset Mapping of the entire distribution network. It will also include adoption of IT applications for meter reading, billing & collection; energy accounting & auditing; MIS, Redressal of consumer grievances and establishment of IT enabled consumer service centers etc. UGVCL will have to utilise this Scheme to get all the information as well as infrastructure IT enabled.

11.6.2 Other Initiatives Under Ground Cable with RMU For ensuring consumer satisfaction by providing the continuous and reliable power supply, the work of underground cable system in Bopal, Ghuma, Ambli and Thaltej, Bodakdev near Ahmadabad city and the religious place at Ambaji are under progress. The Company has planned underground cable system in Adalaj, Info City and Science City area near Ahmadabad city. Company needs to expand this drive into other major cities as well. Feeder Bifurcation The Sceme for bifurcation of over loaded feeders and having a poor voltage regulation should be planned to improve the quality of power in agriculture feeders. Govt Schemes The Company should also plan to achieve the targets if all Govt Sponsred electrification activity schemes like RGGVY, Zupad Patty, Kutir Jyoti, TASP Wells, TASP-Petapara, BPL-Zupad Patty, NGP under tribal area, Primitive Tribal House Electrification, Micro Irrigation System for tribal Agri Connections.


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12. Operational Plan

12.1 Sales Projections

12.1.1 It has been observed from past experience that the historical trend method has proved to be a reasonably accurate and well accepted method for estimating the load, number of consumers and energy consumption. In light of the above, UGVCL has estimated the above for various customer categories primarily based on the CAGR trends during past years.

Table 21: The CAGR for Sales Growth

Sales (MU)5 years CAGR FY 10 over 06

3 years CAGR FY 10 over 08

FY 10 over FY 09

Low Tension ConsumersResidential 10.09% 8.06% 6.5%Commercial 15.25% 15.81% 13.4%Industrial LT 5.08% 4.57% 10.2%Public Water Works 6.73% 8.79% 10.1%Agriculture 5.47% 7.43% 10.7%Street Light 5.22% 5.72% 2.7%LT Total 6.33% 7.66% 10.2%High Tension ConsumersIndustrial HT 16.99% 14.78% 17.8%Railway Traction 2.20% 4.45% 0.0%HT Total 16.90% 14.73% 17.8%

TOTAL 8.36% 9.17% 11.9%

Table 22: Growth rate considered for Projections

Sales (MU) FY10-11 FY11-12 FY12-13 FY13-14 FY14-15 FY15-16Low Tension ConsumersResidential 10.09% 10.09% 10.09% 10.09% 10.09% 10.09%Commercial 15.25% 15.25% 15.25% 15.25% 15.25% 15.25%Industrial LT 5.08% 5.08% 5.08% 5.08% 5.08% 5.08%Public Water Works 6.73% 6.73% 6.73% 6.73% 6.73% 6.73%Agriculture 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Agriculture - MeteredStreet Light 5.22% 5.22% 5.22% 5.22% 5.22% 5.22%LT Total 6.33% 6.33% 6.33% 6.33% 6.33% 6.33%High Tension ConsumersIndustrial HT 16.99% 16.99% 16.99% 16.99% 16.99% 16.99%Railway Traction 2.20% 2.20% 2.20% 2.20% 2.20% 2.20%HT Total 16.90% 16.90% 16.90% 16.90% 16.90% 16.90%

TOTAL 8.36% 8.36% 8.36% 8.36% 8.36% 8.36%

Agriculture (Metered)


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UGVCL, based on internal targets is planning to release new connections under this category. Accordingly, the additional connected load expected in this category is going to increase based on its average HP of Discom. For calculation of sales, average consumption of unmetered and metered consumers is considered. In Gujarat, the average consumption of metered consumer is around 700 kWH/HP/Annum and consumption of unmetered consumer is 1700 kWH/HP/Annum so for projection of sales for additional connection, 1200 kWH/HP/Annum is taken.

Table 23: Additional Sales for Agriculture Metered Category

Agriculture MetedNo. of

ConnectionsAverage HP of

Discom HP Increase MW IncreasePer HP

ConsumptionAdditional Sale (MU)

FY 2010-11 17 - - 1,200 - FY 2011-12 3,700 17 62,168 46 1,200 75 FY 2012-13 3,700 17 62,168 46 1,200 75 FY 2013-14 3,100 17 52,086 39 1,200 63 FY 2014-15 2,600 17 43,685 33 1,200 52 FY 2015-16 2,600 17 43,685 33 1,200 52

12.1.2 Considering the above growth rates annually the category wise sales have been projected as shown on the following table.

Table 24: Category wise Sales Projections






A LT Consumers1 Residential 1,417 1,560 1,717 1,891 2,082 2 Commercial 553 638 735 847 976 3 Industrial LT 749 787 827 869 913 4 Public Water Works 507 541 577 616 658 5 Agriculture 7,191 7,266 7,328 7,381 7,433 6 Public Lighting 38 40 42 44 46

LT Total (A) 10,455 10,831 11,226 11,647 12,108 B HT Consumers7 Industrial HT 3,627 4,243 4,964 5,807 6,793 8 Railway Traction 13 13 13 13 14

HT Total (B) 3,639 4,256 4,977 5,820 6,807 Grand Total (A + B) 14,094 15,086 16,203 17,467 18,915

S.No. ParticularsSales (MUs)

12.1.3 As seen from the above tables, the Residential, Commercial and industrial HT

consumers have been contributing the maximum share in sales.


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12.2 Distribution Loss

12.2.1 The company has achieved a significant reduction in distribution losses, during recent years. These efforts shall continue and will be enhanced. However, loss reduction is a slow process and becomes increasingly difficult as the loss levels come down.

12.2.2 It is assumed that for initial 4 years of control period the losses will reduce by 0.5% and for fifth year it is assumed to be reducing by 0.25%.

Table 25: Distribution Loss Trajectory

ParticularsFY 2011-12(Projected)





Distribution Loss 13.50% 13.00% 12.50% 12.25% 12.00% 12.3 Energy Balance

12.3.1 The energy requirement for UGVCL will be met by supply from GUVNL. Based on the sales and distribution provided above, Energy Balance of UGVCL for the second control period FY12-FY16 is as shown below:

Table 26: Energy balance for the FY12 to FY16

S.No. Particulars UnitFY 2011-12(Projected)





1 Energy Sales MUs 14,094 15,086 16,203 17,467 18,915 MUs 2,200 2,254 2,315 2,438 2,579

% 13.50% 13.00% 12.50% 12.25% 12.00%3 Energy Requirement MUs 16,294 17,340 18,518 19,905 21,494

MUs 759 798 842 894 966 % 4.45% 4.40% 4.35% 4.30% 4.30%

5Total Energy to be input to Transmission System

MUs 17,053 18,138 19,360 20,799 22,460

6 Pooled Losses in PGCIL System MUs 357 456 535 603 546 7 Total Energy Requirement MUs 17,410 18,594 19,895 21,402 23,006

2 Distribution Losses

4 Transmission Losses

12.4 Bulk Supply Tariff & Power Procurement Plan (MYT Period)

In order to envisage a uniform tariff across all the Discoms a Bulk Supply Tariff has been envisaged for the state. In order to minimize the power purchase cost, a single Merit Order Dispatch (MOD) is run for all the Discoms. The NPC power plants, renewable plants & hydro power plants viz. SSNNL Hydro, NPC Tarapur and Ukai Hydro have been considered as must-run power plants and so they have been excluded from merit order calculations. The dispatch from individual generating stations is worked out based on the merit order of the variable cost of each generating unit. RLNG gas based plants are run at 30% availability for the FY 2011-12 & then at 5% for the rest of the control period.


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12.4.1 Given below is the Power Procurement from different sources of power generation for MYT second control period i.e. from FY 2011-12 to 2015-16.

Table 27: Power Availability Plan from Existing Plants

1 Ukai TPS 850 9.00 75% 247 1.71 2 Ukai Hydro 305 0.70 13% 24 0.00 3 Gandhinagar I to IV 660 10.00 79% 266 2.38 4 Gandhinagar V 210 9.00 85% 97 2.13 5 Wanakbori I to VI 1,260 9.00 85% 366 2.11 6 Wanakbori VII 210 9.00 85% 95 2.02 7 Sikka TPS 240 11.00 68% 122 2.77 8 Kutch Lignite I to III 215 12.00 66% 222 1.18 9 Kutch Lignite IV 75 12.00 75% 129 1.11

10 Dhuvaran oil - - 0% - - 11 Kadana Hydro 242 1.19 6% 61 0.00 12 Utran Gas Based 75 4.00 80% 29 2.37 13 Dhuvaran Gas Based - Stage-I 91 3.00 80% 48 2.41 14 Dhuvaran Gas Based - Stage-II 94 3.00 80% 57 2.39 15 Utran Extension 295 3.00 80% 229 2.07

1 ESSAR 242 3.00 70% 202 2.95 2 GPEC 391 2.90 70% 307 2.40 3 GIPCL II (160) 82 2.90 80% 27 1.95 4 GIPCL-SLPP 250 10.00 75% 158 1.14 5 GSEG 126 2.90 80% 101 1.77 6 GIPCL - I (145) 21 2.90 80% 11 2.15 7 GMDC - Akrimota 250 10.00 75% 203 0.74 8 GIPCL, Expansion 250 10.00 80% 158 1.14

1 NPC - Tarapur- 1&2 160 10.00 80% - 0.95 2 NPC - Kakrapar 125 12.50 80% - 2.19 3 NPC - Tarapur- 3&4 274 10.00 80% - 2.32 4 NTPC - KORBA 360 7.93 85% 74 0.76 5 NTPC - VINDHYACHAL - I 230 9.00 85% 58 1.27 6 NTPC - VINDHYACHAL - II 239 7.50 85% 98 1.23 7 NTPC - VINDHYACHAL - III 266 7.50 85% 165 1.21 8 NTPC - KAWAS 143 3.00 85% 58 2.32 9 NTPC - JHANOR 181 3.00 85% 101 2.14

11 SSNNL - Hydro 232 0.50 14% - 2.05 12 NTPC - Kahalgaon (New) 141 7.50 85% 172 1.78 13 NTPC - Sipat Stage-II 273 6.50 85% 192 0.88 14 NTPC - KORBA II 96 6.50 85% 102 0.72

1 Wind Farms (1.75) 22 - 23% - 1.75 2 Wind Farms (3.37) 782 - 23% - 3.37 3 Wind Farms (3.56) 229 - 23% - 3.56 4 Biomass 30 - 80% - 4.40 5 Hydro 9 - 70% - 3.52

1 Shapoorji Pallonji 58 3.00 70% 49 5.21 2 ESSAR - 300 264 2.90 70% 208 5.77 3 GPEC - 655 60 4.00 80% 23 4.96 4 Utran Gas Based - 135 80 3.00 80% 62 5.26 5 Utran Extension - 375 16 3.00 80% 8 5.26 6 Dhuvran Gas Based - Stage 1 - 107 18 3.00 80% 11 5.49 7 Dhuvran Gas Based - Stage 2 - 112 83 2.90 80% 27 5.21 8 GIPCL II (160) - 165 30 2.90 80% 24 5.49 9 GSEG - 156 21 2.90 80% 12 5.59

10 GIPCL - I (145) - 42 44 3.00 85% 18 5.59 11 NTPC - JHANOR - 237 56 3.00 85% 31 -

1 Captive Power Plant (MU) 8 - 80% - 3.64

Renewables:

RLNG Capacity @15%:

Others:

IPPs:

Rated Capacity

Allocated to GUVNL (MW)

Sr. No Particulars

Central Sector:

Auxillary Consumpti

on (%)

Plant Load Factor (%)

Fixed Cost (Rs Crs)

Variable Cost

(Rs/kWh)

GSECL Plants:


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Table 28: Power Availability from New Plants

FY 2011-12

FY 2012-13

FY 2013-14

FY 2014-15

FY 2015-16

1 Wanakbori Expansion 800 9.00 0% 0% 0% 0% 85% 673 1.60 2 Ukai Expansion 6 500 8.50 0% 80% 80% 80% 80% 401 1.54 3 Sikka 3 & 4 500 8.50 0% 7% 80% 80% 80% 401 1.99 4 Dhuvaran CCPP Ext - 3 360 3.00 0% 0% 3% 63% 80% 329 3.39

1 GIPCL Addition 500 10.00 0% 0% 0% 7% 80% 315 1.14 2 BECL 500 11.00 0% 0% 7% 80% 80% 390 1.20

1 NPC kakrapar addition 476 12.50 0% 0% 0% 0% 7% - 2.89 2 NTPC - Lara 140 8.50 0% 0% 0% 0% 7% 170 1.31 3 NTPC - Sipat Stage - I 540 7.50 47% 85% 85% 85% 85% 421 0.88 4 NTPC - Mauda STPS-I 240 6.50 4% 67% 85% 85% 85% 242 0.89 5 NTPC - Barh STPS-I 260 6.50 0% 0% 19% 73% 85% 169 0.81 6 NTPC - Vindhyachal STPS-IV 240 6.50 0% 7% 85% 85% 85% 287 0.87 7 NTPC - Barh STPS-II 174 6.50 0% 4% 67% 85% 85% 102 0.89 8 NTPC - Mauda STPS-II 240 6.50 0% 0% 0% 0% 7% 470 1.05 9 Mundra UMPP 1805 - 9% 16% 17% 48% 80% 1,448 0.91

10 Tilaiya UMPP 300 - 0% 0% 1% 35% 80% 143 0.95

1 Solar Photovoltic 944 - 2% 11% 20% 20% 20% - 15.00 2 Solar Thermal 25 - 5% 20% 20% 20% 20% - 11.00

1 APPL 2000 - 70% 80% 80% 80% 80% 1,634 1.43 2 Aryan 200 - 7% 80% 80% 80% 80% 226 0.55 3 Essar - 1000 MW 1000 - 13% 73% 80% 80% 80% 820 1.27 4 Wardha Power - KSK Mahanadi Power Co 1010 - 0% 0% 0% 0% 73% 1,023 0.62 5 Essar - 800 MW 800 - 0% 0% 0% 0% 73% 798 1.38

Shapoorji Pallonji 800 - 0% 0% 0% 0% 73% 798 1.38

1 GSEG Expansion 351 3.50 7% 80% 80% 80% 80% 238 5.00 2 GSPC-Pipavav 700 3.50 3% 63% 80% 80% 80% 473 5.00

RLNG Capacity @15%:

Competitive Bidding:

Renewables:

Central Sector:

Particulars

Rated Capacity

Allocated to GUVNL

(MW)

Auxillary Consumption (%)

Fixed Cost (Rs

Crs)Sr. No

Variable Cost

(Rs/kWh)

GSECL Plants:

Plant Load Factor (%)

IPPs:

12.5 Power Purchase Cost

12.5.1 Transmission Charges The transmission charges of GETCO are calculated as per the approved charges from GETCO Order for second control period FY 2011-12 to 2015-16, dated 31st Mar 2011. PGCIL charges worked out based on actual of FY 2009-10 with escalation of 5% every year.

12.5.2 GUVNL Cost

GUVNL is entrusted with the operation of supplying power to bulk licensees and the overall coordination between its subsidiary companies. It also undertakes the function of raising and managing the overall loan portfolio of GUNVL and its subsidiaries. As a trading company, GUVNL is charging Rs. 0.04 for every transaction of unit.


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12.5.3 SLDC Fees & Charges

SLDC fees & charges are taken as per the approved from the SLDC Order for MYT second control period FY 2012-16, dated 31st Mar, 2011.

12.5.4 Trading

GUVNL has projected trading of surplus power based on its capacity to sell. For FY 2011-12, 6000 MUs have been considered which would be increased by 1000 MUs each year. GUVNL charges Rs 1 for each unit transacted as profit as well as trading margin.

12.5.5 Total Power Purchase Cost

The total power purchase cost for GUVNL for the second control period FY 2011-12 to 2015-16 comes to the power purchase cost through merit order transmission charges, GUVNL charges and SLDC Fees & charges, as shown below:

Table 29: Power Purchase Cost

YearDiscom

Fixed Cost (Rs Crs)

Discom Variable Cost

(Rs Crs)

Total Power Purchase Cost

(Rs Crs)

Trading Fixed Cost (Rs Cr)

Trading Variable Cost

(Rs Crs)

Profit & Trading Margin

(Rs Crs)

Total Trading Revenue (Rs

Crs)

Net Cost (Rs Crs)

FY 2011-12 8,125 11,348 19,473 798 1,115 600 2,513 18,075 FY 2012-13 11,126 11,793 22,919 1,203 1,275 700 3,177 21,016 FY 2013-14 12,473 13,233 25,705 1,451 1,540 800 3,791 23,454 FY 2014-15 13,902 13,850 27,752 1,713 1,706 900 4,319 25,139 FY 2015-16 18,356 13,702 32,059 2,358 1,760 1,000 5,119 28,700 12.6 Operation and Maintenance Cost

12.6.1 The O&M expenses consist of Employee cost, Administration & General Expenses, Repair and Maintenance expenses, Other Debits, Extraordinary Items, and Net Prior Period Expenses. The O&M expenses during MYT second control period FY 2011-12 to 2015-16 are as below

Table 30: Operation and Maintenance Cost

Rs in Crores






1 Employee Cost 269 284 300 317 336 2 Repair & Maintenance 68 72 76 80 85 3 Administration & General Charges 38 40 42 45 47 4 Other Debits 6 6 7 7 8 5 Extraordinary Items 1 1 1 1 1 6 Net Prior Period Expenses / (Income) (4) (4) (4) (4) (5) 7 Other Expenses Capitalised (53) (56) (59) (63) (66)

8 Operation & Maintenance Expenses 324 343 362 383 405


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12.7 Capital Expenditure (CAPEX) Plan

Table 31: CAPEX plan for UGVCL

Rs in Crores

Sr. No. SchemesFY 2011-12(Projected)





A Distribution SchemesNormal Development Scheme 69 71 72 79 87 System improvement Scheme 136 48 48 53 58 Jyotigram Yojana 3 3 3 3 4 Eletrification hutments/Zuppatpatti 4 3 3 3 4 Kutir Jyoti Scheme 1 1 1 1 1 Scheme for meters 38 40 45 50 54 Vivekadhin - - - - - Replacement of Assets 0 0 0 0 0 Others 5 6 6 6 7 Total 256 172 178 195 215

B Rural Electrification SchemeTASP (Wells & Petapara) 9 8 8 9 10 Special Component Plan 1 1 1 1 1 Non TASP Wells 19 21 23 25 27 REC Wells (DPB,Meter,Adivasi Area, OA & SPA) 8 8 8 9 10 BADP 1 1 1 1 1 Total 37 38 40 44 49

C OTHERSEnergy Conservation 5 5 5 6 6 Independent Certification agency 0 0 0 0 0 Total 5 5 5 6 6

D Non Plan SchemesRe-Non Plan (Tatkal) - - - - - RGGVY - - - - - APDRP - - - - - Total - - - - -

E Others New SchemesAutomatic PF Control Pannies 10 10 10 11 12 ADB - - - - - Aerial Bunch Conductors 2 2 2 2 2 HVDS in selected sub division 14 14 14 15 17 Hand held Equipment 1 1 1 1 1 GE 14.91 to 14.96 0 0 0 0 0 GIS in cities 7 7 7 8 8 Automation & Computerisation 3 3 3 3 4 Under Ground Cables 20 28 30 33 36 Load Shedding transformers 3 3 3 3 4 Other renovation works 16 17 18 20 22 Misc Civil Works 4 4 4 4 4 Others Schemes (Nirmal Gujarat) 1 1 1 1 1 RAPDRP 28 33 40 - - Total 108 123 133 102 112 Capital Expenditure Total 407 338 356 347 382


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12.7.1 The funding of above mentioned Capital Expenditure is envisaged through various sources categorised under four headings namely: Consumer Contribution, Grants, Equity and Debt. The grants have been considered based on the present budgeted figure available with the companies. The remaining expenditure is proposed to be funded through debt and equity in the ratio of 70:30. The detailed breakup of funding of capital expenditure during MYT for second control period FY 2011-12 to 2015-16 is mentioned below.

Table 32: Funding of CAPEX

Rs in Crores






1 Capital Expenditure 407 338 356 347 382 2 Less : Consumer Contribution 62 64 65 71 78 3 Grants 21 19 19 21 23 4 Balance CAPEX 324 255 272 256 281 5 Debt @ 70% 227 179 191 179 197 6 Equity @ 30% 97 77 82 77 84

12.8 Depreciation

12.8.1 UGVCL has considered the Closing Gross Block of Fixed Assets as in the Balance Sheet of FY 2009-10. The provisional assets addition in FY 2010-11 has been considered to arrive at the estimated Gross Block in the beginning of the FY 2011-12 and thereof. The addition during the MYT second control period FY 2011-12 to 2015-16 has been projected considering projected capital expenditure plan for the same for each year.

12.8.2 Depreciation has been calculated taking into consideration the opening balance of assets in the beginning of the year and the provisional capitalisation. The GERC regulations specify that the CERC rates have to be used for computation of the depreciation to be charged during the year. The projected depreciation for MYT for second control period FY 2011-12 to FY 2015-16 is as shown below:

Table 33: Depreciation during the FY12 to FY16

Rs in Crores






1 Gross Block in Beginning of the year 2,905 3,312 3,650 4,006 4,353 2 Additions during the Year (Net) 407 338 356 347 382 3 Depreciation for the Year 162 180 198 215 234 4 Average Rate of Depreciation 5.21% 5.18% 5.17% 5.15% 5.14%


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12.9 Interest & Finance Charges

12.9.1 The interest expenditure on account of long-term loans depends on the outstanding loan, repayments, and prevailing interest rates on the outstanding loans. Further, the projected capital expenditure and the funding of the same also have a major bearing on the long-term interest expenditure.

12.9.2 The interest on the opening loans has been computed considering the weighted average rate of interest for the last year and @ 10.50% on the new loans drawn during the year.

12.9.3 The figure of Guarantee has been taken at the same level as the projected figures of FY 2010-11. UGVCL submits that it has been allocated some Govt. of Gujarat Guarantees, where it is required to pay the guarantee charges. These are the legacy loans which have come from the erstwhile GEB. These charges are, thus, beyond control of UGVCL and hence require to be considered in the total financial cost.

12.9.4 The Interest and Finance Charges for MYT second control period FY 2011-12 to 2015-16 is projected as tabulated below.

Table 34: The Interest and Financial Charges

Rs in Crores






1 Opening Loans 623 688 687 679 643 2 Loan Additions during the Year 227 179 191 179 197 3 Repayment during the Year 162 180 198 215 234 4 Closing Loans 688 687 679 643 606 5 Average Loans 656 687 683 661 624

6 Interest on Loan 61 64 64 62 58 7 Interest in Security Deposit 30 30 30 30 30 7 Guarantee Charges 2 2 2 2 2 8 Total Interest & Financial Charges 93 96 95 93 90

12.10 Interest on Working Capital

12.10.1 The rate for calculation of interest on working capital has been considered as per SBAR on 1st April 2011, which is 11.75%. PGVCL has used the same for computing the interest on working capital for MYT second control period FY 2011-12 to FY 2015-16 as shown below:


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Table 35: Interest on Working Capital

Rs in Crores






1 O & M expenses 29 32 35 39 43 2 Maintenance Spares 37 43 49 55 63 3 Receivables 459 541 613 670 774

4 Total Working Capital 526 616 698 764 880 5 Rate of Interest on Working Capital 11.75% 11.75% 11.75% 11.75% 11.75%

6 Interest on Working Capital 62 72 82 90 103

12.11 Return on Equity

12.11.1 The return on equity has been computed @ 14% on average equity based upon the opening balance of equity and normative additions during the year, which has been arrived at by considering 30% of the capital expenditure net of consumer contribution and grants as funded from equity.

12.11.2 Accordingly, the normative return on equity for MYT second control period FY 2011-12 to 2015-16 is as shown below:

Table 36: Return on Equity

Rs in Crores






1 Opening Equity Capital 704 801 878 960 1,036 2 Equity Additions during the Year 97 77 82 77 84 3 Closing Equity 801 878 960 1,036 1,121

4 Average Equity 753 840 919 998 1,079 5 Rate of Return on the Equity 14% 14% 14% 14% 14%

6 Return on Equity 105 118 129 140 151

12.12 Non tariff Income

12.12.1 The income in this category comprises of interest on loans & advances to employees / contractors, income from investments with Banks, Delayed Payment Surcharges from the Consumers etc. In the absence of any basis of projection, UGVCL has considered the Non-Tariff Income for second control period FY 2011-12 to 2015-16 same as actual figures of FY 2009-10.


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Table 37: Non Tariff Income

Rs in Crores






1 Interest on Staff Loans and Advances 1 1 1 1 1 2 Interest from Banks, Investments and Consumers 0 0 0 0 0 3 Delay Payment Charges from Consumers 19 19 19 19 19 4 Income from Sale of Scrap 2 2 2 2 2 5 Gain on sale of Fixed Assets 1 1 1 1 1 6 Income from Staff Welfare Activities 0 0 0 0 0 7 Interest from Consumers 0 0 0 0 0 8 Miscellaneous Receipts. 7 7 7 7 7 9 Excess provision of Bad Debts written back 14 14 14 14 14

10 Government Grant Write back/Consumer Contribution 47 47 47 47 47 11 Grant for Energy Conservation 0 0 0 0 0

Total Non-Tariff Income 92 92 92 92 92

12.13 Provision for Bad Debt

12.13.1 Provision for bad & doubtful debts is considered at 0.20% of the revenue from sale of power. It is a very legitimate expenditure which is associated with the business risk and is a consumer related expense as the UGVCL is in a distribution business. UGVCL accordingly, has projected Provision for Bad & Doubtful Debts for the MYT second control period FY 2011-12 to 2015-16 as follows:

Table 38: Provision for Bad Debt

Rs in Crores






1 Provision for Bad Debts 7 8 9 10 11

12.14 Taxes

12.14.1 UGVCL has projected Income Tax as per the actual for FY 2009-10. It is requested to the Hon’ble Commission to pass on the impact of revised tax rates as per approved budget by the Central Government.

Table 39: Taxes during the FY12-FY16

Rs in Crores






1 Normative ROE 105 118 129 140 151 2 Provision for Tax / Tax Expenses 1 1 1 1 1


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12.15 Aggregate Revenue Requirement

12.15.1 Based on above discussed expenses, the Aggregate Revenue Requirement for FY 2011-12 has been determined as Rs 5,511 Crores. The Table below shows projection of Aggregate Revenue Requirement by UGVCL under MYT second control period FY 2011-12 to 2015-16.

Table 40: Aggregate Revenue requirement for FY12-FY16

Rs in Crores






1 Cost of Power Purchase 4,849 5,767 6,572 7,191 8,386 2 Operation & Maintenance Expenses 324 343 362 383 405

2.1 Employee Cost 269 284 300 317 336 2.2 Repair & Maintenance 68 72 76 80 85 2.3 Administration & General Charges 38 40 42 45 47 2.4 Other Debits 6 6 7 7 8 2.5 Extraordinary Items 1 1 1 1 1 2.6 Net Prior Period Expenses / (Income) (4) (4) (4) (4) (5) 2.7 Other Expenses Capitalised (53) (56) (59) (63) (66) 3 Depreciation 162 180 198 215 234 4 Interest & Finance Charges 93 96 95 93 90 5 Interest on Working Capital 62 72 82 90 103 6 Provision for Bad Debts 7 8 9 10 11

7 Sub-Total [1 to 6] 5,496 6,466 7,318 7,982 9,229

8 Return on Equity 105 118 129 140 151 9 Provision for Tax / Tax Paid 1 1 1 1 1

10 Total Expenditure (7 to 9) 5,603 6,585 7,448 8,123 9,381 11 Less: Non-Tariff Income 92 92 92 92 92

12 Aggregate Revenue Requirement (10 - 11) 5,511 6,493 7,356 8,031 9,289

submitted by uttar gujarat vij company ltd. … plan fy 2011-12 to fy...submitted by uttar gujarat...

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