Franchisee Models: CESU’s Experience

1. Franchisee Models: CESU’s Experience Bhubaneswar

2. OBJECTIVE To Minimize AT&C Loss To Bring Improvement In Metering, Billing & Revenue Collection To Create A Consumer Service Centre Nearer To Consumer To Create Consumer Awareness Against Power Theft

3. Areas of Operation Franchisees in Rural & Semi-Urban areas - Areas under RGGVY - Loss prone sections /sub-divisions or divisions where AT&C loss is more Urban areas of Bhubaneswar & Cuttack, where utility can bring down the loss level to less than 15% are excluded from franchisee area.

4. Models of Operation Community Based Micro-Franchisees (Women SHGs/ GPLFs) for Rural Areas Input Based Franchisee-Operations on Incremental Revenue Sharing Basis at Division level

5. USE OF WOMEN POWER IN RURAL FRANCHISE Women Self Help Groups (SHGs) / GPLFs as Local Communities

6. Women SHGs / GPLFs as Franchisees • The SHG movement in Orissa has become almost synonymous with economic empowerment of women & economic development of the state • SHGs are important form of community in the rural areas of Orissa • This Scheme offers income generating activities like meter reading & collection of electricity dues • 10% to 20% of income generated by this goes to a common pool to meet urgent needs of the group members, after paying 80% to 90% income to women members who carry out the actual works • The Federations of SHGs at GP level (GPLFs) are supported by Government of Odisha • Hence, SHGs/GPLFs as franchisees offer a WIN-WIN solution for both SHGs & electricity distribution utility (DISCOMs).

7. Nayagarh Experience

8. How it happened.. Women Self Help Groups (SHGs) entered into energy distribution In all the 154 GPs of the Nayagarh Division, women SHGS are engaged as Franchisees.

9. ACTIVITIES OF A WOMEN SHG AS FRANCHISEE 1 Meter Reading Spot Billing Machine (SBM) Maintain Register 2 5 SHG Functions Bill Generation Money Collection Complaint Handling Bill Collection 4 3

10. ACTIVITIES UNDERTAKEN BY THE FRANCHISEES 1. Meter Reading, Billing & Bill Distribution using Spot Billing Machines (SBMs) 2. Collection of both current & arrear amount 3. Compliant Redressal on time 4. Organizing ‘New Service Connection Mela’ to bring unauthorized consumers into its billing fold 5. Facilitate the installation of meters in the premises of all the consumers & Distribution transformers 6.Creating Awareness among the consumers against power theft in the form of hooking & meter tampering/ meter bypass

11. REMUNERATION MECHANISM… cont A collection target is fixed for each SHG, which is called as ‘Base Line Collection Target’ (BLCT) The BLCT is 120% of Average Collection for last 12 months of that area. Every year this target is increased by 20% till it they achieve 100% collection against billing. 6% on collection is paid as incentive up to BLCT(R1). 2% additional incentive is paid on incremental revenue collected beyond BLCT & upto 125% of BLCT.(R2) 4% additional incentive is paid on incremental revenue collected beyond 125% BLCT. (R3) 20% on the collection against long disconnected arrear amount (R4)

12. REMUNERATION MECHANISM 8. 10 % on Penal Amount collected from unathorised consumers (R5). 9. Rs.3.00 is paid towards per meter reading. (F1). (Spot Billing Machines are supplied by CESU ) 10.Rs.100/- per new connection is paid to bring one APL family into billing fold.(F2) 11.Rs.1000/- is paid as reward towards arrest of one consumer involved in power theft. (F3) 12. PENALTY: For any shortfall of collection compared to BLCT, 6% of shortfall amount is collected as penalty from SHG.(P)

13. SECURITY DEPOSIT TO BE GIVEN BY SHG • Three Days’ Average Collection Amount • Rs.11,000 /Spot Billing Machines • 1 Spot Billing Machine can be used for 1000 consumers

14. SELECTION CRITERIA WITH ITS WEIGHTAGE 1. Gradation of SHG as per Government list -60% 2. Registration No.-3% 3. Qualification of members (at least two member can read & write English: +2 pass and above) – 3% 4. Age of SHG-3% 5. Activities undertaken by SHG for at least last two years -3% 6. Amount of Saving – 3% 7. Linkage with Bank (which bank & since when)- 3% 8. Amount of loan taken by the SHG- 3% 9. Awards received by SHG -3% 10. Amount of money available at bank- 3% 11.Rotational Leadership -3% 12 Managerial Capability – 10%

15. SELECTION FORMAT FOR WOMEN SHGs Selected Women SHG Highest Evaluation Mark

16. Replicating Nayagarh Experience in Entire Odisha After seeing its success, on 16.9.2011, Energy Department called a meeting on ‘Involvement of SHGs in Franchisee development in energy distribution ‘ Director, Mission Shakti, REC, Chairman CESU, representatives from OPTCL/GRIDCO and Distribution Companies (DISCOM) participated in the discussion Government of Odisha decided to start a programme called: “ SHG ENERGY FRANCHISE ARRANGEMEN” (SEFA) All GP Areas of Odisha are covered by this Programme. These women SHGs are now working under Input Based Franchisees in rural areas of Nayagarh, Talcher, Angul & Athagarh Now, WSHG or thir federation at GP level (GPLF) will be involved in commercial activities

17. Input Based Franchisee-Operations on Incremental Revenue Sharing Basis (IBF-IRS) at Division level

18. Distribution Franchise Agreements (DFA) have been signed for 14-divisions of CESU with - M/s Enzen Global Solutions Private Limited (ENZEN) - M/s Feedback Electricity Distribution Company Pvt. Ltd (FEDCO) - M/s River Side Utilities Pvt. Ltd. - M/s Seaside Utilities Pvt. Ltd V With Incremental Revenue Sharing (IBF-IRS) basis Covering approx.16.75 lakh consumers of CESU (which is 77 % of total consumers) DFA Period : 60 months INPUT BASED FRANCHISEE OPERATIONS IN CESU

19. To bring AT&C loss level to 15% with 100% metering of consumers, DTRs & feeders To induct technology, in the form of Smart Metering and development of an ON-LINE system for online communication. To bring in an investment in the form of CAPEX,OPEX,Metering and Technology To achieve BSP payment by the end of 24 months To improve customer services with provision of customer call centres, mobile fuse call and maintenance centres, as required; Objective of IBF-IRS model

20. PRINCIPLE OF IBF-IRS MODEL Capital Investment by Franchisees on following areas: Establishing Automatic Meter Reading System with High Value Consumers and DTRs Procurement and Installation of single phase, 3-Phase whole current, LTCT & HTTV meters & Metering Units Procurement & Use of AB Cable in theft prone areas (at least 20% of existing LT Line length ) Technology Induction in Meter Reading, Billing, Collection and curbing power theft

21. Operational Expenses on following areas: Operations & Maintenance of LT Lines from Secondary side of DTRs to premises of Customers Carrying out DTR neutral grounding, phase balancing, consumer indexing and pole indexing, etc Construction of LT lines against deposit works Replacement of DTRs from CESU’s imprest Stock Meter Reading, billing & Collection activities PRINCIPLE OF IBF-IRS MODEL

22. To carry out the operation of meter reading, billing including bill delivery & collection from all the consumers and all such data regarding billing, collection and other related works should be provided to CESU on regular basis in agreed electronic format; To supply and install consumer energy meters To establish easy payment option facilities for the consumers to pay their Electricity Bill to CESU To carry out monthly energy auditing on distribution transformer wise and 11 kV feeder-wise. Scope of Works of Distribution Franchisees

23. Remuneration Structure of Franchisees The additional revenue generated over base line from this project will be shared between project developer & CESU in the following ratios: During 1st Year : 60:40 During remaining 4 years : 50:50 The additional revenue is the DIFFERENCE between new RPU (Realization Per Unit) during period of franchisee operations and base line RPU fixed on data pertaining to FY 2011-12 MULTIPLIED with input units for the month. Whenever there will be change in RST during the contract period, the baseline figure will be revised accordingly. Monthly meter rent collected from customers where franchisee has installed its own meter , will be paid to the franchisee. Franchisee will get its weekly payment in 7-days’ interval based on proceeding month’s remuneration, subject to reconciliation at the end of the month.

24. Benefits to CESU.. So far… Revenue Realization per unit (RPU) has increased by 22% to 97% AT&C loss reduction by 1.31 % to 24% Investment on CAPEX, OPEX and Metering : Rs.65 Cr Services of more than 6000 employees engaged by Franchisees in carrying out commercial activities and LT maintenance activities

25. PERFORMANCE of M/s FEDCO on RPU RPU value has increased by 63% to 81%

26. PERFORMANCE of M/s RUPL & M/s SUPL on RPU RPU value has increased by 26% to 65%

27. PERFORMANCE of M/s Enzen on RPU RPU value has increased by 22% to 97%

28. Performance - AT&C Loss Reduction in ENZEN Areas Compare to base line AT&C Loss reduction is from 3.22% to 20.59%

29. Performance - AT&C Loss Reduction in FEDCO Areas Compare to base line AT&C Loss reduction is from 14.29% to 24.21%

30. (B) Performance - AT&C Loss Reduction in RUPL/SUPL Areas Compare to base line AT&C Loss reduction is from 1.31% to 6.2%, except one Division

31. Investments Made by DFs So far…… 2.18 Lakh meter Installation with an investment of Rs.24 Cr On CAPEX : Rs.20 Cr On OPEX works : Rs.21 Cr This excludes their expenses towards Employees of more than 6000 and A&G expenses of maintain field offices etc .

32. TO CONCLUDE….. 1.PROPER UTILIZATION OF WOMEN POWER IN FRANCHISEE AS A COMMUNITY GROUP WILL MAKE RURAL POWER SECTOR SUSTAINABLE 2. INVESTMENT IN TECHNOLOGY, AB cabling & METERING BY FRANCHISEES WILL GO A LONGWAY TO BRING SUSTAINABILITY IN THIS OPERATIONS