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by Karthikeya Pisupati Deloitte Touche Tohmatsu India Pvt Limited October 15, 2003 PowerPoint PPT Presentation


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CII – PTC Conference on The Power Market Post Electricity Act 2003: Entities, Business Models and Implications. SESSION II : EMERGING SHAPE OF DOWNSTREAM LINK - TRANSMISSION & DISTRIBUTION. by Karthikeya Pisupati Deloitte Touche Tohmatsu India Pvt Limited October 15, 2003. Context.

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By karthikeya pisupati deloitte touche tohmatsu india pvt limited october 15 2003

CII – PTC Conference onThe Power Market Post Electricity Act 2003: Entities, Business Models and Implications

SESSION II : EMERGING SHAPE OF DOWNSTREAM LINK - TRANSMISSION & DISTRIBUTION

byKarthikeya PisupatiDeloitte Touche Tohmatsu India Pvt LimitedOctober 15, 2003


Context

Context

  • More than 10 years of Reforms in the power sector

  • Some states have developed their own “reform Acts”

    • Unbundled their SEBs into G, T & D’s

    • Setting up of Electricity Regulatory Commissions

    • Privatisation of distribution (Orissa, Delhi)

  • Others yet to unbundle their integrated utility

  • Need to give thrust to reforms (in order to realise efficiencies)

    • Introducing markets, open access, contestability of customers etc

  • This presentation looks at the business models of T & D in the light of new Electricity Act, 2003


India is following established path of industry evolution

India Is Following Established Path Of Industry Evolution

Monopoly

Transitional

Competitive

Scandinavia

U.K.

New

Zealand

Argentina, Chile

Australia

Germany

United States

Canada

Italy

Customer Contestability

France

South Africa

Brazil

India (2003)

Mexico

Russia/CIS

Pakistan

Asset Management

Customer Management


States position circa 2003 still monopolies

States position – Circa 2003 – Still Monopolies

High

AP

Haryana

Karnataka

Maharastra

Rajasthan

Gujarat

TN

HP

Punjab

Delhi

UP

Uttaranchal

Efficiency Levels

MP

Orissa

Tripura

Assam

Sikkim

Nagaland

Ar.Pradesh

Bihar

Low

Integrated

Unbundled

“D” Privatised

Mapping based on the Report on Rating of SEBs, ICRA & CRISIL


Value drivers by segment

Value Drivers - By Segment

Monopoly Model

Competitive Model

Management Focus

Assets

Customers

Engineering

Finance/

Marketing

Key

Competencies

Physical

Portfolio

Customer

Portfolio

Value Lever

Applicable Segments

Transmission/

Distribution

Generation/

Retail


What s the new business model for t d

Large Consumers

Bulk

Supply

Retail

Supply

Dist

Wires

Franchise Consumers

SO

Txn

Wires

Other Consumers

TRANSCO

DISCOM

Open Access Unbundling Functions Trading Non-exclusivity

TRANSCO

DISCOM(S)

Other Consumers

Franchise Consumers

Dist

Wires

SO

Txn

Wires

Retail

Supply

Large Consumers

Contestable Consumers

GRIDCO (S)

Wholesale

Supply

TRADECO (S)

What’s the new Business Model for T & D?


Implication of new business model

Implication of new business model

Functionally, under T & D segment of the business,

  • Trading

  • System Operation

  • Transmission wires

  • Distribution wires

  • Retailing – Non contestable consumers, Tariffs

    Covered in the subsequent slides


Trading

Physical

Pricing

Issues/ Concerns

  • Creation of Multi-buyers & Multi sellers

  • Define Trading models

    • Scheduling & Dispatch

    • Imbalances

  • Pricing of energy

    • Bilateral

    • Spot

  • Treatment of subsidies/ cross-subsidies in a transparent way

  • Move to pricing signals – SRMC/ LRMC

  • Balancing & Settlement modalities

  • Shortage of capacity

  • Pricing of ancillary services

  • Non-exclusivity of area of supply

  • Grid available to move power over different regions

  • Pricing for HT/ LT

Trading

  • Act specifies “Non-Discriminatory” access to users

  • Multiple Licenses

  • CERC/ SERC to fix surcharge for open access with Special treatment for captive


System operation

Physical

Pricing

Issues/ Concerns

  • Scheduling & Dispatch – Merit Order

  • Treatment of Imbalances

    • Spot

  • Ancillary services

  • Balancing & Settlement – need to know the physical contracts for settlement

  • Pricing of Imbalances

  • Pricing of Ancillary services

  • Settlement

    • Contract

    • Balance

  • Sophisticated system (within state)

  • Demand management

    • Treatment of shortages

    • minimum hrs of supply for Agriculture/ rural

  • Dispatch of Non-conventional

System Operation

  • Act specifies Balancing & Settlement functions with LDCs


Transmission wires inter intra state

Physical

Pricing

Issues/ Concerns

  • Accurate Measurement of energy & capacity handled

  • Congestion Management

  • Availability of system

  • Unbundling the “Average charges”

    • Contract Path

    • MW mile

    • Postage stamp/ Incremental Postage Stamp

  • Congestion pricing

  • Adequate pricing signal for maintenance of system

  • Determination of contract path pricing within the state

  • New capital expenditure

    • Incentive to build?

Transmission wires – Inter & Intra state

  • Act specifies only transmission wires for CTU/ STU along with system operator function


Distribution wires

Physical

Pricing

Issues/ Concerns

  • Accurate Measurement of energy & capacity handled

  • Loss reduction investments

    • HT/LT ratio

    • Transformer loading

  • Availability of system

  • Unbundling the “Average charges”

    • cost to serve various loads

  • Defining “wires” cost for multiple licensees

  • Pricing signal for new investment (adequate for good load development)

  • Right to connect (for all categories immediately?)

  • Duplication of wires?

Distribution Wires

  • Act specifies only metered supply after two years

  • Allows “inset” franchising

  • Special Policy for Rural distribution


Retailing franchise consumers

Physical

Pricing

Issues/ Concerns

  • Accurate measurement of LT system

  • Metering

  • Billing efficiency

  • Reduction of “theft” & other commercial losses

  • Pricing to consumers

    • Cost to serve

    • Retain customers

    • Customer service

  • Managing demand of Agriculture

  • Allocation rules – position in case of multi buyers system

  • Need to retain the creamy layer from competition

  • Tariff rebalancing

Retailing – Franchise consumers

  • Act allows for special Policy for treatment of rural electrification

  • National tariff Policy?


General system issues

General System Issues

  • Long term PPA signed with IPP’s & other generators

  • Pricing pressure on adverse hydro/ thermal mix of generation

  • Limited number of trading players initially?(from capital adequacy, capacity to bear loss positions)

  • Major cash flow problems – need to still depend on large subsidy from state government

  • Affect private participation in the existing distribution businesses of state

  • Tariff principles (cross-sub elimination, agriculture tariffs, multi-year tariffs)

  • Competitive bid tariff route (binding)– How to define it for Trading, Wires?


What are the pre requisites for competitive market

What are the pre-requisites for Competitive Market?

  • Tariff reforms

  • Transparent/ clear understanding of Value chain and associated costs

  • Elimination of supply shortage

  • Multi-buyer and Multi seller

  • Price responsive Demand and Supply

  • Position for generators to participate in spot market

  • Access to Transmission and Distribution wires

  • Interconnectivity to trade power across states/ regions


Enablers in electricity act 03

Enablers in Electricity Act 03

  • Allows Electricity Boards to unbundle/ transfer to new corporate entities

  • Unbundling of wires & Trading business

  • Fixed time frame for enunciating policy and action plan

    • Provision of open access

    • Tariff policy

    • Rural electrification

The Act is in the right direction

Modalities to be worked out - by States & Centre jointly……..


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