Issues in Electricity Distribution
Some Fundamentals

• T&D Losses: difference between the energy available and the energy supplied (as recorded) to the consumers.
• T&D Loss=Technical Loss+Non-Technical Loss
• Technical Loss-Loss occurring due to physical characteristics of the power system(power lines, transformers, substation equipments) (Occur mainly in the transmission/distribution lines and the transformers)
• Non-Technical Loss-Loss occurring due to wrong measurement of energy supplied to consumers.(Reasons-theft and faulty meters)
• T&D Loss=Total Energy-Total Load=Total Energy-(Direct Load+Consumer Supply)
• Percentage T&D Loss=100 x (T&D Loss/Total Energy)
• Till such time as all agricultural and domestic supplies are fully metered and energy audit is in place, T&D losses are a derived figure/inappropriate measure.
• Till the time metering is completed, the level of losses is being assessed in terms of Aggregate Technical and Commercial Losses.
• AT&C Loss is the difference between units input into the system and the units for which the payment is collected/realised.
• AT&C=(Energy Input-Energy Realised)/Energy Input
• Energy Realised is the number of units for which money is collected from the consumers.
• As per CEA T&D Loss in India is of the order of 31%.
• As per PFC AT&C Loss in India in 2005-06 is of the order of 33.46%.
• AT&C Loss is in the range of 40-50% in many states.(Jharkhand-65%, Manipur-72% and Sikkim-78%)
• AT&C Losses-Ahmedabad and Surat-11-12%,Noida Power Co.: 10.49%, BSES Maharashtra:11.32%, North Delhi Power Co: 26.52%
• Availability Based Tariff and its impact:ABT refers to the new tariff structure which separates the fixed and variable costs of power generation. Fixed Charge (Capacity Charge)=Operating and Maintenance Cost+Income Tax+Interest+Repayment of Loan+Depreciation+Return on equity (Under ABT a generation company would receive this component depending on the declared availability of its plant and irrespective of actual generation.)Variable Cost/Energy Charge=Fuel Cost (Depends upon schedule of generation as given by load dispatch centre, based on load requirement.) Segregation of fixed and variable charges enables generation based on incremental cost of generation, bringing down the overall generation cost.
• Wheeling Charge: The tariff payable as per the tariff orders provided by various regulatory commissions.
• Open Access: Refers to a mechanism whereby generating company can sell power to a buyer of its choice and a consumer can purchase power from seller who gives him the best price anywhere within the country.
• Cross Subsidy Surcharge: This is to be paid by open access consumers. This is calculated as the difference between the consumer tariff and the cost of supply. Cost of Supply is calculated based on the weighted average of power purchase costs(fixed and variable) of the costliest 5% sources(excluding liquid fuel based sources) adjusted for average loss compensation at the relevant voltage level and the distribution network charges. Surcharge=Tariff-{Cost x (1+Loss/100) + Distribution Charge}(Cost=Weighted average cost of power purchase of the top 5% of power(as per the merit order generation) excluding the liquid fuel based generation and renewable generation, Distribution Charge=Wheeling charge set for the distribution utility, L=System losses till the voltage level at which power is withdrawn)
Distribution Reforms
• Bifurcation of Feeders: Due to fast expansion of towns the length of the feeders has gone far beyond the standard limit which has been creating problem of low voltage and high technical loss. This warrants bifurcation. Bifurcation also enables the utility to segregate various types of load, which helps utilities in restricting supply to particular types of consumers for certain time period.
• Segregation of Rural Feeders from Urban Feeders/ agricultural feeders from non agricultural feeders: This will help the utilities in effective energy accounting and auditing and will help in fixing accountability.
• Revamping old, weak and overloaded networks along with feeder bifurcation-Quality equipment matching load requirements and of much longer guarantee periods are required to be installed. The required shunt capacitors need to be installed to improve power factor and voltage.Due to inadequate network expansion commensurate with load growth, many power transformers, distribution transformers, 33kv lines and 11kv feeders are overloaded. Most of the distribution networks in India are quite old which results in reduced reliability, increased R&M expenses and poor quality of supply.
• Maintenance of substation and distribution network.
• Adoption of High Voltage Distribution System(HVDS) to increase High Tension-low tension ratio.
• Governance or administrative Measures include constitution of SERC and timely filing of tariff petitions, preparation of long term plans for strengthening and improvement of distribution systems along with associated transmission system, training of employees, proper network planning for future expansion, provide sufficient budget annually for strengthening and upgradation of electricity network.
• Theft Control-Electricity Amendment Bill, 2005 aims to make all offences under the Electricity Act, 2003 non-cognizable offence. A Scheme of incentives and disincentives will help to motivate the employees of the utilities in reducing the losses and also in controlling theft of electricity. Some State Governments have also constituted special courts and special police stations to deal with cases related to electricity theft. High voltage distribution system has been suggested in the National Electricity Policy as an effective method for prevention of theft as well as reduction of technical loss, improved voltage profile and better consumer service. Other measures include incentive for informers and workshops and awareness programmes for officers of the district administration, power utilities and general public.
• Metering: It was resolved in 2001 for the States to provide 100% metering on 11kv feeders and to start energy accounting and auditing within next six months at 11kv feeder level for fixing accountability at local level. Andhra Pradesh, Assam, Delhi, Goa, Gujarat, Himachal Pradesh, Kerala, Mizoram, Utaranchal and West Bengal have achieved consumer metering above 95%. Arunachal Pradesh, Bihar, Jharkhand, Manipur and Ngaland still have low feeder metering. Most of the States have not yet taken up metering of agricultural consumers. Following steps need to be taken : (i) 100% feeder metering (ii) 100% metering of Distribution Transformers (iii) 100% consumer metering (iv) Pre-paid metering for small consumers/ single point consumers/remote areas (iv) GIS mapping of assets and consumer indexing (v) Energy accounting and auditing coupled with proper billing.
• Franchising: It is necessary that the system of franchisee is implemented in a phased manner by the state government/utilities in order to bring down commercial losses, improve collection efficiency and provide door-step services to the consumers. The assets will be owned by the state utilities and the franchisee will be allowed to recover the investment through regulatory mechanism. Franchisee will be required to pay the electricity charges to the utility at bulk supply tariff after allowing for reasonable T&D loss in the network. The franchisee would be responsible for distribution of electricity within an identified contiguous area for a prescribed duration, carry out minor/major repairs, issue of new connections etc. and for collecting revenue directly from the consumers at a tariff decided by the regulator. Franchisees need to be selected following a transparent process on the basis of clearly laid down criteria. Wherever feasible, franchisees should be selected on the basis of competitive bidding for the most favourable bulk supply tariff for the distribution licensee. Franchisees could be NGOs, Users Association, Cooperatives, individual entrepreneurs or the Panchayat institutions. Franchisees have to be developed and will need hand holding by the utility for some time.REC has launched a national programme for franchisees under which a task force on capacity building has been formed. The performance of a franchisee will have to be closely monitored on various benchmark parameters like AT&C losses, revenue collection, reliability of supply and consumer services etc.
• Determination of Cross Subsidy Surcharge and Wheeling Charge: The forum of regulators could expedite determination of cross subsidy surcharge and wheeling charge in a rational manner as provided in the tariff policy The States need to extend cooperation to SERCs in bringing about reduction in cross subsidies. The Tariff Policy provides that the cross subsidies are to be reduced to the range of + 20% of the average cost of supply by year 210-11 and the SERCs were required to notify roadmap within six months for achieving this. The policy also provides that wheeling charges should be determined on the basis of same principles as laid down for transmission charges so that open access consumers are not discriminated against in respect of wheeling charges.
• Early implementation of intra state ABT as envisaged in the Tariff Poicy
• Restructuring of Power Distribution System through introduction of Open Access: Privatisation of distribution system has shown mixed success. However this only transfers State monopoly to private monopoly. Open access in distribution has not materialised due to the inability of the consumers to aggregate and approach the generator directly, due to high charges including cross subsidy surcharge and wheeling charges and due to the highly entrenched interests of the incumbent distribution entities etc. The electricity Act can be interpreted to mean a supplier of electricity who has no asset and does not need any licence, but can buy electricity for resale. However, when read with the CERC regulations on trading, this interpretation no longer holds. Section 12 of the Electricity Act provides that licence will be required for trading in electricity. But as per Section 13, the provisions of section 12 may not be applicable to certain non-commercial organizations like local authority, panchayat institutions, users' association, cooperative societies, NGOs or franchisees. However, under CERC regulations 'licence' means licence granted under section 14 of the Electricity Act to undertake inter state trading in electricity as an electricity trader. So some confusion exists. In order to foster competition in distribution, we would need to create the category of licensed Electricity Suppliers under the Electricity Act to come under the present definition of 'trader' by appropriate regulations under the Act. These suppliers would have no assets of their own but use the transmission and distribution system of the present transmission service providers and distribution service providers. The existing distribution licensees could be the default suppliers for consumers who fail to register with any of the suppliers. In course of time this function can also be phased out. Rates could be regulated through tariff caps and fixed transmission and distribution charges. Rate caps will ensure that retailers do not make money out of the supply till such time as the prices are adequately balanced through the forces of demand and supply. There could be requirements that a minimum percentage of consumers are residential consumers. Such electricity providers could be regulated through licensing with the regulator, perhaps as a sub-class of 'trader' provided suitable regulations are made. The entities who wish to register must be financially capable of carrying out the business of electricity supply. However, open access would not assume any significant proportion unless sufficient quantity of electricity is available in the market outside the long term PPAs.
• Encouraging development of various products for different consumer groups: Efforts should be made to develop different products with retailers coming up with different packages to cater to different populations.
• Change in the role of the regulatory authority: Tariff fixation should increasingly be left to the market and the regulatory authority should rather monitor more closely the performance standards in the power sector.
• Creation of a vibrant Power Exchange: A vibrant power exchange could ensure that the resultant price is an outcome of both supply and demand as it would match the prices at which various suppliers are willing to supply. This system would score over the system of competitive bidding where buyers enter the market separately and compare the prices bid by the electricity suppliers.
• Improving the financial health of state utilities: Utilities should put in place a Financial Turnaround Plan duly approved by the regulator and the State Government, which should include timely filing of Annual Revenue Requirement(ARR) and Tariff Petition, adoption of Multi-Year Tariff as provided for in the National Tariff Policy 2006, and a scheme for timely payment of electricity dues by Government Departments, local bodies and advance payment of subsidies from the State Government, in addition to restructuring of their balance sheets as a one-time measure.
• Creation of a central repository of data in electronic form: Absence of this leads to delay in filing tariff petitions and responding to queries from regulators.
Accelerated Power Development and Reform Programme(APDRP)
• In 2001, Government introduced the Accelerated Power Development Programme(APDP) with the objective of initiating a financial turnaround in the performance of the State owned power sector. The programme was formulated to finance specific projects for upgradation of subtransmission and distribution network and Renovation and Modernization of power projects in Thermal and Hydro Sectors.
• In 2002-03 the programme was re-christened as APDRP and the assistance was linked to reforms.Initially the programme covered 63 distribution circles out of the 400 distribution circles in the country. Later the focus shifted to densely electrified zones i.e. urban and industrial areas. The programme now aimed at strengthening and upgradation of the subtransmission and distribution system in the country with the objective of reducing AT&C losses, improving quality of supply of power, increasing revenue collection and improving customer satisfaction. The strategy envisaged technical, commercial, financial and IT intervention, organization and restructuring measures and incentive mechanism for reducing AT&C and cash loss reduction.
• Under this programme, SEBs are entitled to receive 50% of the losses reduced by them in a year from the centre in the form of a grant. APDRP has both an investment component financing investment both via loan and grant in State Power Systems and an incentive component linked to loss reduction.
• Status as of January, 2007: 571 projects were sanctioned under the investment component with an estimated outlay of Rs.17033.58 cr involving grant component of Rs.6445.84 cr and loan component of Rs.2274.23 cr. The Government has so far released Rs.4666.79 cr grant and the entire loan component. Under the incentive component nine states have achieved cash loss reduction ofRs.5254.60 cr and has become eligible for incentive of Rs. 2627.30 cr. The Government has so far released Rs. 1587.12 cr out of this amount. AT&C Losses have been brought below 20 percent in 212 APDRP Towns and below 15% in 169 towns.