Renoir Consulting Limited December 2003

1. ‘Improving Efficiency And Profitability In Distribution’ POWER SECTOR Renoir Consulting LimitedDecember 2003

2. Current Indian Scenario – Distribution • Estimated level of billing efficiency of 55% • Estimated collection efficiency of 41% • Estimated total cost of inefficiency of Rs 57000 crores • 2001-2002 SEB losses of Rs 33000 = 1.5% GDP • SEB lose 110 paise for every unit of electricity sold • (SOURCE: MINISTRY OF POWER APDRP OVERVIEW)

3. Current Indian Scenario – Distribution • Since 1994-95 _SEB has claimed that it has carried out regular audits of ‘Express Feeders’ (Go_1996). • _SEB re-iterated this claim in its tariff proposal submitted in March 2000. • It repeated this claim again in the proposal submitted August 2001. • August 2001 _SEB made available six months of data for 220 ‘Express Feeders’. • Out of a total of 1320 data points (ie six months multiplied by 220 feeders) nearly 45% of these data points indicate loss figures that are either less than –0.5% or greater than +5%! (Prayas 2001).

4. Current Indian Scenario – Distribution • This is striking because, usually, the technical losses on such type of feeders is usually 1% to 2%. • This implies either ineffective metering, commercial losses or excessive technical losses. • This is a clear indication of _SEB failure to carry out effective metering even for these 220 ‘Express Feeders’. • It is worthwhile to note that these 220 ‘Express Feeders’ account for nearly 20% of _SEBs yearly revenue (considering a HT industrial tariff of Rs 4.2 unit). • (Prayas 2001)

5. Current Indian Scenario – Distribution “There is a lack of accountability in distribution, outdated rules, regulations, management structures, and practices…..unless you establish accountability at all levels, you can never improve performance”. Mr Suresh Prabhu – Union Minister Source: Financial Express 18 March 2002

6. The Issues Illustrated – Non-Technical Non-Technical Loses Cash flow ? Lost in CIBS Records do not exist Theft/Faulty Meter Outstanding Opportunity Not followed up

7. Technology of Change • 6 stage process Definition Development Installation Change Management Results Sustaining Results

8. Technology of Change • 6 stage process Definition Development Installation Change Management Results Sustaining Results • Process • System • Structure • The Issues • Training • Creative Tension • 4 Stages • Minds Path • Measurement • Time Frame • Behaviour

9. Technology of Change • 6 stage process Definition Development Installation Change Management Results Sustaining Results • Process • System • Structure • The Issues • Training • Creative Tension • 4 Stages • Minds Path • Measurement • Time Frame • Behaviour

10. Public Sector Customer Service Issues • Many customers details were not in customer information billing system (CIBS). • Many customers were in the billing system but no bills were sent. • The customer address information was sometimes incorrect. • Formal procedures for disconnection were not always observed and practices varied by zone. • There were differing practices in the zones of the same organisations concerning the selection of accounts to disconnect. • Disconnectors often spent time waiting for disconnection and reconnection notices to be produced. • There was normally extensive daily planning, but little weekly or monthly planning to control work.

11. Public Sector Customer Service Issues • Meter readers had stopped completing Irregularity Reports (IRs) for faulty and tampered meters because they were not being used to take action. • Meter readers were often seen as solely responsible for customer billing. There were many customer contact points that the MRs did not control where customer billing should have happened. No-one else was being held accountable. • In Shops, tellers used to ask ‘how much do you want to pay’ providing the customer with the opportunity not to pay the full bill. • There was a substantial debtors problem across all customer types. The enforcement mechanisms laid down by the Electricity Acts were not being followed and this was resulting in customers building up debts sometimes in excess of 1 year and millions of dollars.

12. Public Sector Network Service Issues • The supply network and maintenance systems in place were not adequate to provide the levels of supply reliability demanded by the nations. • Often a lack of information, particularly at middle management level upon which to make business decisions. • Often a lack of accountability/ownership, particularly at supervisory level for problems that arose. Typically, a breakdown was always someone else’s fault and someone else’s problem. • Critical elements were often missing from the maintenance management frameworks. There were often no measures of mean-time between failure (MTBF) at a component level to facilitate effective preventative maintenance.

13. Public Sector Network Service Issues • There was generally a lack of accountability for restoration performance unnecessarily increasing customer outages. • Organisations had a substantial number of projects in progress at the same time and needed to reduce these numbers to improve lead times for improving supply reliability and reduce cash flow requirements. • There was normally no established discipline of carrying out root cause analysis of re-occurring problems. • A general lack of co-ordination across departments. • There was a general culture of lack of accountability and performance orientation.

14. Technology of Change • 6 stage process Definition Development Installation Change Management Results Sustaining Results • Process • System • Structure • The Issues • Training • Creative Tension • 4 Stages • Minds Path • Measurement • Time Frame • Behaviour

15. Behaviour Change What is the definition of madness? “ Doing what you have always done and thinking somehow magically performance will improve”

16. Stage 2 - Development Internal Business Framework Processes Activities Results Systems Information Behavioural Change Structures People Education Training

17. Sub Process Example: Disconnection Issue Management Government Accounts Special Letter JBE Counter Clerk Faulty Meter W/O 30 Cross Meter Counter Clerk Back billing NTL W/O 90 UPJ Disconnection Direct Illegal Restoration Theft Clerk Unpaid & Vacated Clerk W/O 40 Close Account Deduct Deposit Access Found Supply Disconnected Unpaid & Vacated Higher Level Disconnection Disconnected Account Status Unbilled Team Follow-up No Access Metered Illegal Restoration Higher Level Disconnectionn Disconnection Expense Slap-on Notice No Access Address Not Found Take to MRE Next MR To Check

18. Process Planning

19. Process Planning

20. Process Planning

21. Management Control Systems Development

22. Performance Measurement KPI Format (Weekly Report)

23. Standard Operating Procedures

24. Technology of Change • Change - Stage 3 Definition Development Installation Change Management Results Sustaining Results • Process • System • Structure • The Issues • Training • Creative Tension • 4 Stages • Minds Path • Measurement • Time Frame • Behaviour

25. Stage 3- Installation • Training Tools - Skills Matrix Figure indicates the % Multiskill attained by a area/ division/ region. Figure indicates the %skill attained by individual. The individual to be trained % people trained for particular skill The skill required by individual

26. Stage 3- Installation • Training Modules • Technology of Change • Active Supervision • Managing with numbers • Training Skills • Communication Skills • Time Management • Team Building • Management Systems

27. Stage 3- Installation Creative Tension Effective Meetings Structure and set up Action solving root causes Individuals responsible Information Systems Transparency Confrontation Positive Confrontation To provide accountability To change behaviour Procedures Problem Analysis Root Cause, not symptoms 5 Why analysis Determination, not deferral Accountability

28. Technology of Change • Change - Stage 4 Definition Development Installation Change Management Results Sustaining Results • Process • System • Structure • The Issues • Training • Creative Tension • 4 Stages • Minds Path • Measurement • Time Frame • Behaviour

29. The lack of awareness and understanding that a successful change process has to go through ‘four changes in mindset’is a common reason why many strategic change programmes fail… We also make false assumptions about peoples ability to adhere to new ways of working, and to manage and accept change. Change Assessment Management System (CAMS) Where Most Things Go Wrong!

30. Renoir Minds Path Matrix Incompetent Competent Conscious Understanding Usage Unconscious Culture Compliance Change Assessment Management System (CAMS) The Four States of Mind! …No shortcuts possible... The Four States of Mind! Incompetent Competent Conscious Support Coach Unconscious Delegate Direct

31. Change Assessment Management System (CAMS) The Key to Success! The secret to successful change management is to be able to assess and measure your progress through the ‘minds path’. “ If you can’t measure it, you can’t manage it.” The four mindsets must be measured by auditing. Auditing is a quantitative measure of a qualitative thing!

32. Change Assessment Management System (CAMS) Measuring the Four Mindsets • Audit questionnaires are developed to assess the mindset levels using a structured approach: • Closed ended questions for compliance. • Open ended questions for understanding. • Demonstrative questions for usage. • The audit questionnaire answers get converted into a scoring scheme… • 0 for wrong or not done. • 1 for partially right or partly done. • 3 for correct or demonstrated. • The percentages of each system performance category are plotted • The target is 100%.

33. System Utilization Status 100% 80% 60% Achievement 40% 20% 0% -5 -4 -3 -2 -1 Current Period Mechanical Understanding Usage Change Assessment Management System (CAMS) Installation Status Installation Status 100% 90% 80% 70% 60% Achievement 50% 40% 30% 20% 10% 0% -5 -4 -3 -2 -1 0 Current Period Installed Partially Installed Not Installed

34. Technology of Change • Change - Stage 5 Definition Development Installation Change Management Results Sustaining Results • Process • System • Structure • The Issues • Training • Creative Tension • 4 Stages • Minds Path • Measurement • Time Frame • Behaviour

35. Section 1System Performance

36. System Performance – LV Breakdowns • Project Headlines As At End October 2000 • Reduction In Breakdowns (No. LV Breakdowns). (25% improvement). • Base (Date) Current Target Imp • 270 (03/99) 115 135 57.4% • 366 (12/99) 253 170 30.9% • 64 (03/00) 53 11 17.2% • 46 (03/00) 47 14 -0.1% • 218 (03/00) 71 54 67.4%

37. LV Breakdowns

38. Section 3Projects

39. Reduction in WIP – Value • Project Headlines As At End October 2000 • Reduction in WIP (WIP Value). (15% improvement). • Base (Date) Current Imp • 1,123m (03/99) 770m 31.4% • 127m (03/00) 62m 51.1% • 160m (03/00) 89m 44.4% • 114m (03/00) 62m 45.6%

40. Project Average Closing Duration - Days % Improvement 72 %

41. Section 2Non Technical Losses

42. AT&Cs • Project Headlines As At End October 2000 • Reduction In Losses: (Total losses % measurement). (15% improvement). • Base (Date) Current Target Imp • 15.5% (03/99) 6.06% 5.00% 60.9% • 8.85% (03/00) 5.40% 5.00% 38.9% • 13.% (03/00) 8.55% 5.00% 34.3% • 12.8% (03/00) 8.60% 5.00% 32.65%

43. Unbilled Customers % Improvement 93%

44. Faulty Meters 9.12 mil* 5.74 mil Total Recovery To Date : RM 5.74 m

45. Tampered Meters

46. Section 4Cash Flow Management

47. Cash Flow Management • Project Headlines As At End October 2000 • Reduction Debtors/ACP: (ACP days measurement). (15% improvement). • Base (Date) Current Target Imp • 47.5 (03/99) 38.1 27 19.8% • 39.0 (12/99) 33.2 27 14.9% • 39.4 (03/00) 35.4 27 10.1% • 36.8 (03/00) 30.5 27 17.1% • 33.3 (03/00) 29.9 27 10.1%

48. Technology of Change • Change - Stage 6 Definition Development Installation Change Management Results Sustaining Results • Process • System • Structure • The Issues • Training • Creative Tension • 4 Stages • Minds Path • Measurement • Time Frame • Behaviour

49. Project Results • “I appreciate the discipline that you have put into the workforce, as it was severely lacking in our culture . . . .Everyone used to promise to do things, but rarely delivered. . . . Now people promise, and they deliver . . . People don’t like to loose face, so if they have promised and everyone knows they have promised, they will deliver. Everyone’s job is now very transparent, so everyone else knows what you should be doing as well”. • “I used to be concerned that my people spent too much time in meetings, as I did not think that the meetings were of any real benefit. Now I realize that they were not of benefit. Now with a KPI and action focused meetings at all levels, I know that the meeting is at least a focused one. As a result, meetings conducted are generally a lot shorter and more focused, so on the whole, meeting time is reduced, but more effective”.

50. Project Results