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APTransco and Distribution Companies

APTransco and Distribution Companies. An overview of Power Sector Reforms in Andhra Pradesh Performance Improvement Initiatives. July 2003. Agenda. Background of Power Sector in AP Reforms Milestones achieved. Initiatives and Actions taken up till date. Results/Benefits of Reforms

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APTransco and Distribution Companies

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  1. APTransco and Distribution Companies An overview of Power Sector Reforms in Andhra Pradesh Performance Improvement Initiatives July 2003

  2. Agenda • Background of Power Sector in AP • Reforms Milestones achieved. • Initiatives and Actions taken up till date. • Results/Benefits of Reforms • Business Plan (up to FY07) & Turnaround of the Sector

  3. Background-Reasons for Decline in financial performance in AP • The decline in the financial position over the years was due to various reasons such as • Adverse change in Hydro - Thermal mix • Steep increase in cost of power purchase • Higher growth in consumption of subsidised categories like Agriculture and domestic compared to the subsidizing categories like Industries. • Stagnation in industrial consumption from the grid and shift to captive and third party because of higher tariff and low quality of supply • High level of T & D losses both technical and commercial.

  4. Reform Milestones…..

  5. Present Structure of AP Power Sector Generation • Installed Capacity : 10336 MW • Units Handled : 45804 MU • Average Plant Load Factor : 88.9%(Genco) Transmission • Length of transmission network : 668,401 km • No. of substations : 2,196 Distribution • 4 licensees T&D Losses 26.13% in 2002-03 Imports from other regional grids Independent Power Producers Central Generating stations Captive Power Plants APGENCO Single Buyer Model PPA APTRANSCO BSA Differential BSTs SouthernDiscom Central Discom Northern Discom Eastern Discom APSEB has been ‘unbundled’ into a Generating Company, Transmission Company and 4 Distribution Companies

  6. ANDHRA PRADESH POWER SECTORKEY STATISTICS – APTRANSCO & DISTRIBUTION COMPANIES NPDCL ADILABAD Headquarters Warangal Population 14.09 m 2.96 m SRIKAKULAM Consumers KARIMNAGAR Units Input (ARR 2002-03) 7219 MU NIZAMABAD VIJAYNAGARAM APTransco WARANGAL MEDAK VISHAKAPATNAM Headquarters Hyderabad Units Input(ARR 2002-03) 39529 MU KHAMMAM EAST RANGAREDDY GODAVARI EPDCL NALGONDA WEST CPDCL GODAVARI Headquarters Vishakapatnam Headquarters Hyderabad Population 17.23 m KRISHNA MAHABOOB NAGAR Population 23.75 m Consumers 2.89 m GUNTUR Consumers 4.72 m Units Input (ARR 2002-03) 5468 MU Units Input (ARR 2002-03) 14949 MU PRAKASAM KURNOOL BAY OF BENGAL SPDCL ANANTAPUR NELLORE Headquarters Tirupati CUDDAPAH Population 20.64 m Consumers 4.17 m Units Input (ARR 2002-03) 8731 MU CHITTOOR

  7. ANDHRA PRADESH POWER SECTORHIGHLIGHTS IN GENERATION AND INSTALLED CAPACITY • Total installed capacity to the end of March 2003 is 10336 MW, which is second highest after Maharastra. • Capacity addition of 3025 MW from 99-00 • Energy handled during the year 2002-03 is 45804 MU, which is second highest after Maharastra. • The PLF of the thermal generating stations of APGENCO was the highest in the country.APGENCO PLF was 88.9% during 2002-03.VTPS3(95.4%),VTPS2(94.9)&RTPP1(94.8%) were 1st,2nd&3rd Units in the Country in PLF.All India PLF is 70% . Capacity addition-MW Reform period

  8. ANDHRA PRADESH POWER SECTORINVESTMENTS IN T&D INFRASTRUCTURE Rs crores • Invested over 9200 crores over the last 7years in the power sector towards generation transmission and distribution. • Investments increased by more than two times from Rs. 613 crores in 1998-99 to Rs. 1347 crores in 2002-03 • Investment jump in 2002-03 to Rs 1347crores from Rs1072 crores in 01-02 through close monitoring for speedy implementation. Reform period

  9. ANDHRA PRADESH POWER SECTORPHYSICAL AND OPERATIONAL PERFORMANCE PHYSICAL PERFORMANCE • New era of 400 KV system introduced with the erection of 3 Nos. sub-stations and 2015 ckt. KM of line. • Separate 709 industrial feeders erected to provide reliable, interruption free supply to industrial consumers. OPERATIONAL PERFORMANCE • Transmission and Distribution system strengthened to handle 160 MU per day • Peak demand crossed 7000MW during the month of March 2002 • Revenue increased from Rs.4159 crs. In 1998-99 to Rs. 7451 crores in 2002-03 • T&D losses reduced considerably from 38% in 1999 to 26.13% by end of 2002-03.

  10. Government of AP Support & Subsidy GoAP is releasing subsidy regularly monthly to the sector as per the directives of APERC and even some times in advance also. The details of Government Subsidy / support is as in the table shown below.

  11. Government of AP Support & Subsidy 2953 3064 2935 GoAP Subsidy for FY 04 2074 1882 Rs crores Business Plan Assumption 1513 1224 1256 Net revenue Gap 519 Zero FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07

  12. ANDHRA PRADESH POWER SECTORBENEFITS OF REFORMS Investments Capacity Additions Revenue Energy Losses

  13. Profile of Key Indicators during Reforms Support+Subsidy Rs 2985 cr Rs 3064 cr Rs 2935 cr 80.2% Cost Coverage 68.4% Rs 8128 cr 60% 62.5% Rs 6438cr Rs 5597 cr Rs 1882 cr T&D Losses 36.9% 33.9% Revenue Rs 4657 cr 26.13% 29.6% Metered Sales 46.4% 38.1% 42.7% 35% FY00 FY01 FY02 FY03

  14. Investments v/s Reduction in T&D Losses and Reliability/Quality improvements T & D Loss 33.9% 36.9% 29.6% 26.13% 48.7Hz Frequency 48.67Hz 48.52Hz 48.88Hz Average 132kv Voltages 110kv 127kv 119kv 116kv 24.33% DTR Failures 29.07% 28.03% 18.72% Rs 1118 crs Rs 937 crs Rs 1347 crs Rs 1072 crs Investments FY02 FY00 FY01 FY03

  15. Revenue realised and Cost incurred Rs/Kwh Cost incurred per unit of sale Revenue realised per unit of sale Actuals for FY01,02 & 03 As per Tariff order FY01 FY02 FY03 FY04

  16. Initiatives and Actions for Improved Performance • Regular Monitoring of Key Performance Indicators and implementation of Grading System • Adjusting the Target Demand based on actual energy drawals and monitoring Demand accordingly • Improving the Energy Audit methodology and energy accounting system by Fixing interface meters . • Improving the Information system by implementation of IT Tools like PMRS/TIMS/CAT • Improved employee benefits by way of increase in Salary levels • Extensive Training in Technical & Managerial skills to officers and workmen • Improved Customer focus-Establishment of Call Centers, Vidyut - Adalats. Spot Billing System. Improved Communications with Farmers • Administrative, Operational and Financial Autonomy to the Distribution Companies • Monitoring of power supply through Micro Logic Controllers to ensure stipulated supply to Agriculture • Intensive Inspection by DPE & Operation staff and simplification of Assessment process. • Massive replacement (37 Lakhs) of meters with High Quality meters • Monitoring of Power Supply to Industries and creation of Express feeders • Recruitment of Specialists in various Key positions • Monitoring of Power Purchase Cost through Merit order dispatch • Support and assistance from Government by way to timely release of Subsidy

  17. Highlights 2002-03 Specific Revenue improved for all categories. For HT Industrial category the tariff has been reduced and there by sales improved by 26% and Revenue by 24% Rs/Kwh 2001-02 2002-03

  18. Highlights 2002-03 Total Revenue increased by Rs 1690 crores in 2002-03 compared to 2001-02 representing 26.25 % increase In 2001-02 the Revenue was Rs 6438 crores and in 2002-03 the Revenue is Rs 8128 crores Rs crores 2001-02 2002-03

  19. Institutional StrengtheningAdministrative and Financial autonomy to Discoms Measures taken to enhance autonomy of Discoms • Distribution company boards reconstituted. • Executive Director Finance inducted into the board. • Managing Directors of the Distribution companies elevated as Chairman & MDs. • Roles and responsibilities of employees in various positions defined and accountability fixed at each level • Performance Appraisal Systems have been introduced to bring in Accountability and improve efficiency Financial autonomy provided to Discoms to : • Manage it’s own cash; • Raise it’s own funds; • Determine it’s own payment priorities and areas of expenditure; • Manage it’s own treasury function

  20. Institutional StrengtheningRecruitment and Training initiatives • Fresh talent inducted at Managerial levels • Chief General Manager – Human Resources • General Manager – Corporate Planning • General Manager – Information Technology • General Manager – Costing • General Manager – Energy Audit • Public Relations Officer • Zonal Training Centers placed under control of Discoms • Various Executive and Management development programs were conducted

  21. Institutional StrengtheningEmployees’ Options Exercise • Employee Options process completed successfully • A total of 8230 employees allotted through options • More than 93% of the employees got the company of their first preference • All transfers, postings, promotions and disciplinary action powers have been delegated to the DISCOMs in the post-options scenario

  22. Institutional Strengthening Performance Review and Monitoring PMRS is used for: • Monitoring Key Performance Indicators (KPI) • Financial KPI’s • Revenue Billing • Revenue Collection, including Daily Cash Collections • Arrears • Operations statistics • Customer Complaints • Performance Management and Reporting System (PMRS) in place for review and analysis of performance at various levels • Information updated at the district headquarters on a monthly basis • MIS cells established at all Discom headquarters • Viewing relevant aggregated data at each level of the hierarchy • Relevant reports available circle level upwards, online at all levels of the organization • Identification of exceptions at all levels • Centralised reporting facilitates timely updation of data

  23. Efficiency Improvement Initiatives • Consumer Analysis Tool (CAT), a tool for targeting irregularities in Metering, Billing and Collections • CAT cells established at all four Discoms • Company personnel trained on Data Acquisition (receiving and validating data) and Report Generation • Detailed reports being rolled out for inspections by Operations, DPE & APTS • Consumption and receivables analysis for the ARR filing to be generated from CAT across the four Discoms • Monitoring and Tracking system, aimed at regularisation • Enables tracking of theft and malpractice cases, right from detection to recovery • Generates separate exception lists for all cases where procedures and time-lines are not being adhered to • Being implemented in CPDCL; proposed rolled out in other Discoms as well

  24. Efficiency Improvement Initiatives • Transformer Information Management System, TIMS, is a tool which assists in • Analysing reports for effective and faster decision making by the Top management • Facilitating preventive maintenance through focussed inspections • Better inventory management with increased visibility in the stock position • Evaluation of vendors based on their performance • Status of TIMS implementation • Rolled out in all the six circles in SPDCL • Discom has taken the ownership of the system and the process • TIMS reports used for reviewing the performance of offices and vendors • Assisted in reducing the failure of DTRs and saving in repair cost. • Rollout of the solution in other Discoms is currently being done

  25. Efficiency Improvement Initiatives • Contract Management • Use of Energy Management System (EMS) for merit order dispatch • Prototype of dispatch tool for planning merit order being implemented • Book Consolidation Module (BCM) BCM, a tool for aggregation of trial balances, has been implemented at all DISCOMs and assists in • Reduction in the errors in Trial Balances • Timely generation of financial statements • Reduction in monthly books closing time to 3 weeks • Routine books consolidation activities at Circle level • Development of a Fixed Assets Register is in process

  26. Pre EBC Establishment 536 Transmission to Distribution Metering Points considered for Monthly Energy Accounts Meter Readings finalised by 10th of Month Monthly Energy Accounts agreed with Discoms on 25th of each month Diverse local meter reading procedures used Post EBC Establishment 152 Generation to Transmission Metering Points considered for Monthly Invoice Production 807 Transmission to Distribution Metering Points considered for Monthly Invoice Production Meter readings Finalised by 3rd of Month Monthly Energy Certification agreed with Discoms on 6th of each month Standardised Meter Reading Procedures used by 200 trained APTRANSCO staff Efficiency Improvement Initiatives Energy Billing Centre (EBC) - established on April 1, 2001 to produce accurate monthly invoices in accordance with Bulk Supply Tariff awarded by APERC Benefits from The EBC

  27. Customer Service Initiatives • Customer service and call centers established at all district headquarters and being established in all municipalities. • Citizen Charter introduced and implementation monitored through call centers. • Spot Billing implemented for all consumers across the State since July, 2002 • Payment through E-Seva centers as in Hyderabad will be extended to other municipalities during the year 2003-04. • Meetings with consumers held every month at circle and division level • Vidyut Adalats conducted every Monday in Mandal Head Quarters at Section Offices by ADE & AO to redress defective bills of consumers. • Various IT initiatives taken up to improve the performance and bring in transparency / accountability

  28. Performance Highlights - April 02– March 03 Operational Performance • Cumulative T&D System Losses from Apr. 02 – Mar. 03 is 26.13% compared to ARR Target of 28.40% • Transmission losses from Apr.02 – Mar. 03 are 7.47 % compared to the ARR Target of 8 % • Distribution losses from Apr02 – Mar 03 are 21.03% compared to the ARR Target of 22.16 % • Losses in 114 Towns have been reduced from 19.72% in March 2002 to 16.01% in March 2003 • 17% reduction in 11 kV breakdowns compared to previous year

  29. Performance Highlights - April 02 – March 03 Commercial Performance • Demand raised for the period of April to March is Rs 7726 crores as compared to an ARR target of Rs. 7314 crores • Collection for the period April billed in May to February 03 billed in March 03 is Rs 6917crores, 98.52% of demand raised of Rs 7021 crs. • HT metered sales have increased by 21.78% over the previous year • Rs 895 Crores were collected as arrears from April 02 to March 2003 • 108934 cases registered and 67630 cases compounded from April 2002 to March 2003 • Rs 12.80 crores realised against Rs 34.74 crores assessed • 1732 persons arrested from April 02 to March 03 under theft and malpractice cases, compared to 860 in the entire last year

  30. Performance Highlights April 02– March 03 Financial Performance • For Transmission & Distribution System, the total revenue income from April 02 to March 03 is Rs. 9638 crores and expenditure is Rs. 10011 crores resulting in net loss of Rs. 373 crores • For Transco Revenue Income from Apr. 02 – March 03 is Rs. 8647 crores and Expenditure is Rs. 8434 crores resulting in net profit of Rs. 213 crores. • For DISCOMS Revenue Income from Apr. 02 – March 03 is Rs. 9380 crores and Expenditure is Rs. 9966 crores. Resulting in net loss of Rs. 586 crores.

  31. Summary Financial Performance - April 02 to March 03 As a combined entity, APTransco and Discoms have combined losses of Rs 373 crores

  32. Business Plan(up to FY07) & Turnaround of the Sector • The latest Business plan forecasts load growth at 8.2% CAGR for all the categories • in the plan horizon of 2002-2007.The LT Growth rate is 8.32% and HT 10.79%. • LT forecast includes –2.57% growth for Agriculture. • The total T&D losses are expected to be reduced to 19.5 % from FY03 loss of 26.13%. • This includes reduction of Transmission losses from 7.47% to 5% in 2007 & Distribution • Losses from 18.66% to 14.5% in 2007. • To meet this load a capacity addition of 5326 MW is estimated till 2007. • In order to meet the load growth and reduce losses as stated above an investment of • Rs 5671 crores is required in Generation(APGenco) & Rs 4683 crores for T&D Sector. • Revenue increase has been projected at a rate of 12% for FY04, 23% forFY05, • 17% for FY06 and 18% for FY07. • With support from the Government (net support of Rs 13,623 crores between FY03 & FY07 )and • realisation of projected revenue as above the T&D Sector will be able to earn a return from • FY 04 onwards. • APTransco has already earned a return in FY03.Discoms will earn a return from FY04.

  33. Post Reform Benefits to Andhra Pradesh Power Sector • The World Bank has agreed to lend, upto US $ 1000 Million for Transmission and Distribution improvements and augmentation of system over a decade. This will be given as a series of loans under their Adaptable Program of Loans (APL). The first loan of US $ 210 Million has been already sanctioned and is being used to remove the critical bottlenecks in the Transmission and Distribution system. • Department for International Development (DFID) has sanctioned 42.7 Million Pounds to revamp the Distribution System. DFID is also providing 2.7 Million Pounds as technical assistance grant to the power sector. • The Overseas Economic Cooperation Fund (OECF) now known as JBIC has sanctioned funds to the extent of Rs. 390 crores for Srisailam evacuation scheme and Rs. 311 crores towards the Simhadri evacuation scheme. • PFC has sanctioned a project loan of Rs. 240 Crores for the year 1999-2000,Rs. 162 Crores during 2001-02 and Rs. 324 Crores during 2002-03 for Transmission and Distribution schemes. • Rural Electrification Corporation (REC) has sanctioned Rs. 720 crores for the period from 1998-2001 and sanctioned project loan of Rs. 913 crores for the period 2001-02 and Rs. 1104 Crores for the period 2002-03 for APTRANSCO & DISCOMs for rural electrification works.

  34. Post Reform Benefits to Andhra Pradesh Power Sector (Contd.,) • Kfw, Germany have agreed to finance the expansion of Vijayawada Thermal Power Station Stage-IV (660MW). • Proposals finalised for setting up of Rayalaseema Thermal Power Station Stage II (2x210 MW) with the assistance of M/s CMEC, China. • Kothagudem Thermal Power Station (KTPS) Stage-V (2 X 250MW) completed with PFC, ICICI and IDBI funding. • Technical assistance to support implementation of Reform & Restructuring programme is grant funded by DFID and CIDA.

  35. Way Forward

  36. Formation of Joint Venture Distribution Companies • Key component of Power Sector Reforms is introduction of Private Sector participation in the Distribution Power Sector and formation of Joint Venture Distribution Companies through a transparent International Competitive Bidding process. • This is to be done by divesting a majority Stake and relinquishing management control in each of the four Distribution Companies to bring in better management practices of Private Sector and required investments into the Sector. • A Cabinet Sub-Committee comprising Ministers of GoAP was constituted to take a view on the strategy on privatization and options available. • DFID appointed HSBC /Crisil Consortium as Privatisation Consultants and they are on board from January 2002. • The privatization consultants have furnished a draft privatisation strategy report in July 2002 and discussions held with APTRANSCO and GoAP. • The Hon’ble CM, AP was also apprised of the proposal by the consultants in the first week of August 2002. • Based on Sub-Committee views on strategy report, Government to take decision on launching of the privatisation process after studying the investment climate. • It will take about 12 – 18 months to form 1st Joint Venture after GOAP takes a decision on launching of privatisation process.

  37. AP is one of the largest states in India with a population of over 77 million and a geographical area of over 275 thousand sq. Kms. • Richly endowed with minerals and other natural resources like coal, natural gas etc., • Two of the large rivers (Krishna & Godavari) flow across the State.

  38. First State to come out with a vision document (Vision 2020) • Focus on infrastructure development, attracting foreign investment and private sector participation. • Programmes are supported by financial assistance from the World Bank and other International funding agencies.

  39. Govt.commitment for overall development of the State and in particular taking all steps to make the State as Investor destination. • Single window clearances for new industries.

  40. The State Power Sector is the third largest in the Country. • APGENCO Thermal Plants eg. RTPP,VTPS and KTPS etc.,got awards for highest PLF in the country. • As per the CRISIL rating A.P. Power Sector is rated as number one in the Country in the year 2001-2002. • A.P. is one of the first few States in implementing reforms successfully . • Rated by funding agencies as one of the best reforming States.

  41. Quality of supply improved • Separate industrial express feeders provided for maintaining uninterrupted and quality supply to the industries. • Incentives provided for industrial consumers consuming more power. • For HT consumers separate cells formed for redressal of grievances.

  42. Thank you

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