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Distribution Franchise. … An Experience . Licensee in Ahmedabad, Gandhinagar & Surat Franchisee in Bhiwandi, Agra & Kanpur* . Distribution. 1647.5 MW Capacity 500 MW at Ahmedabad 1147.5 MW near Surat. Generation. Integrated Power Company. Transmission.

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distribution franchise

Distribution Franchise

… An Experience

torrent power at a glance

Licensee in Ahmedabad, Gandhinagar & Surat

  • Franchisee in Bhiwandi, Agra & Kanpur*


1647.5 MW Capacity

  • 500 MW at Ahmedabad
  • 1147.5 MW near Surat


Integrated Power Company


  • JV with PowerGrid for 400 KV network
Torrent Power – At a glance
  • Part of Rs. 8200 Crore Torrent Group
    • Pharma (Turnover ~ Rs. 1916 Crores)
    • Power (Turnover – Rs. 5958 Crores)

* - yet to takeover operations

why distribution reforms
Why Distribution Reforms???
  • Present Distribution Scenario
    • SEBs are majorly responsible for distribution
    • Monopoly – Defined License areas
    • Lack of requisite investment in T&D sector
    • Lack of R&D in the distribution sector
present distribution scenario drawbacks
Present Distribution Scenario – Drawbacks!
  • High AT&C losses
  • Frequent power failures due to very old and dilapidated network
  • Massive load shedding
  • Low customer satisfaction
    • Customer service standards are poor
    • Lengthy and tedious mechanisms for resolving consumer grievances
  • Uninspiring work culture
  • Old and obsolete technologies still being used
  • Unacceptable safety standards
present distribution scenario high distribution losses
Present Distribution Scenario – High Distribution losses

Source: Think BRIC – Comparative Study of Power Sector by KPMG- Jan 2010

need of the hour
Need of the hour
  • The power sector requires huge capital outlay to reduce the current deficit and to sustain future GDP growth
  • It is not possible for the government to fund the growth of the sector on its own
  • Investment are forthcoming in Generation from the private sector but it is not sustainable if distribution reforms are not undertaken
  • The government has embarked on an aggressive mission – “Power for All by 2012” and the private sector has a key role in achieving the objectives stated in the mission
distribution reform process effectiveness and acceptance model



SEB Driven





Political Acceptance





Reform Process

Distribution Reform Process Effectiveness and Acceptance Model
benefits of franchise model
Benefits of Franchise Model
  • Reduction in technical losses and theft
  • Improvement in Metering, Billing and Revenue Collection
  • Capital investments in upgradation of the network
  • Enhancement in customer service quality

A win-win scenario for all:

Consumers, DISCOM and Franchisee

technical benefits
Technical Benefits
  • State of the art distribution system in franchise area
  • Lower peaking load due to better technical T&D management
  • Better overall grid stability due to lower system interruptions
  • Improvement in reliability parameters like SAIFI, SAIDI, CAIDI, etc.
financial benefits to the state
Financial Benefits to the State
  • Assured returns from distribution franchisee
  • No investment in the franchise area by licensee
  • Reduction in losses
  • Contribution to the Government exchequer
    • Increase in collection of Electricity Duty as the metering and billing becomes more accurate
    • Increase in collection of other Central and State taxes pursuant to growth of economy of franchisee area
better services to customers
Better services to Customers
  • Improved services
    • Faster new connections/ load extensions
    • Lower attendance time for faults
    • Grievance Redressal mechanism
    • Convenient bill payment facilities
  • Better availability and quality of power
  • Increased customer satisfaction
what is a franchisee
What is a Franchisee?

As per Definitions of The Electricity Act, 2003

“franchisee” means a person authorised by a distribution licensee to distribute electricity on its behalf in a particular area within his area of supply;

Facilitation of Franchise Model in the Section 14 of the Act:

Provided also that in a case where a distribution licensee proposes to undertake distribution of electricity for a specified area within his area of supply through another person, that person shall not be required to obtain any separate licence from the concerned State Commission ………………………

role of a franchisee


to supply power at

EHV substations

Fault Restoration

Meter Reading


Customer Care


Energy Input




Revenue Collection

Role of a franchisee

All Obligation and Rights of a Distribution Licensee




rights of df
Rights of DF
  • DF to distribute power in the franchise area for a fixed term as per the agreement
  • DF is an exclusive agent of Licensee in the Franchise Area
  • DF has all rights of a Distribution Licensee
    • E.g. authorization under Section 126, 135,152 of Electricity Act 2003
responsibilities of df
Responsibilities of DF
  • Purchase of power
    • From Licensee at EHV substations feeding the franchise area
  • Network Related
    • Network analysis and improvement planning
    • Make capital investment for renovation/ upgradation of network
    • Distribution asset maintenance
responsibilities of df1
Responsibilities of DF
  • Consumer Related
    • Metering
    • Meter reading
    • Billing as per Regulatory Commission’s approved Retail Tariff
    • Collection (both current revenues and arrears)
    • Issuing new connections
    • Adherence to all relevant Regulations of ERC including Supply Code and SOPs
    • Attending consumer grievances
responsibilities of licensee
Responsibilities of Licensee
  • Supply of energy
    • As per the pre-determined schedule of supply on a non discriminatory basis subject to power availability
  • Payment to DF upon expiry / termination
    • For assets created during the agreement term at depreciated value.
    • For closing inventory
    • Arrears for last one month
responsibilities of licensee1
Responsibilities of Licensee
  • Grant of Right to use of distribution assets in the circle
    • Network assets in field from the start of outgoing 22 kV feeders of EHV s/s
    • Assets in stores as opening inventory
  • Deputation of willing employees to DF
    • Deputation rules/ deputation package of DF will be applicable.
commercial terms

Payment by DF

Charges for input energy as quoted by franchisee

Arrears collected

Security Deposit for new connections

Electricity Duty etc











Payment by Licensee

Incentive on recovery of arrears


Specified payments upon termination / expiry

Competitive bidding ensures that the State Discom gets the right price for input energy

bhiwandi introduction
Bhiwandi : Introduction
  • Government of Maharastra took the lead in distribution reforms and introduced a franchisee model for public-private partnership
  • DISCOM consequently put through a process for selection and appointment of a distribution franchisee for the Bhiwandi Circle of its license area of Maharastra State
  • Torrent Power was selected as the Distribution Franchisee through an open competitive bidding process
  • Distribution Franchise Agreement was signed with DISCOM on 20th December, 2006
  • Operations taken over from 26th January, 07
bhiwandi at the time of takeover
Bhiwandi : At the time of takeover
  • AT&C losses : 58%
  • Mandatory load shedding of 6 hours at the time of takeover and subsequently increased to 8 hours
  • Further distress load shedding due to deficit of 300 MVA in EHV Network
  • Overstressed distribution Network
    • Overloading
    • Breakdowns / trippings
  • Distribution transformer failure rate of 40%
  • Poor reliability of supply
  • Only 23% of the customers have accurate metering and there are many unregistered consumers
key challenges
Key Challenges


  • Human Resource
    • Manpower
    • Integration
  • Administrative Setup
    • Offices
  • T&D loss reduction
    • Technical loss
    • Commercial loss
  • Reliability of system
  • Safety


  • Power Availability
    • Load Shedding
    • Transmission Capacity
  • Customer Confidence
    • Customer Service
    • Becoming a part of Bhiwandi
overcoming the challenge
Overcoming the Challenge

Problem: HR Challenge

Issue: Creating administrative setup

Recruiting & Training of Manpower

Integration of all employees – TPL, MSEDCL, Laterals and Freshers

Measures: Offices made functional before Day One

Training provided in batches at Ahmedabad

Providing basic necessities – food, commutation

Defining uniform policies for all employees

Developing a “team attitude”

Direct communication with all employees regarding Goals and Targets

Uniform and quick appraisal & reward mechanism

overcoming the challenge1
Overcoming the Challenge

Problem: Lack of Adequate Power

Issue: Mandatory Load Shedding of 6 hrs increased to 8 hrs

Further distress load shedding of 2 to 4 hrs

Inadequate EHV transmission capacity

Measures: Joint team with Transco & DISCOM formed

EHV network reconfigured

All support provided for creating additional capacity

Reduction in losses led to reduction in load shedding

as per MERC approved MSEDCL load shedding criteria

ehv network augmentation



EHV Network Augmentation
  • Joint Team of TRANSCO / DISCOM / DF to identify the bottlenecks in Transmission Network
  • 3-Years EHV Augmentation Plan prepared and got approved
    • Reconfiguration of EHV Lines
    • Additional power transformers
    • New EHV Substation
    • Switchyard extension for 22KV feeders
  • 250 MVA Transformation capacity added so far
overcoming the challenge2
Overcoming the Challenge

Problem: Frequent Power Failures

Issue: 2 to 3 DTs failing everyday

Frequent conductor breakdown

Lack of adequate maintenance leading to deterioration

of network

Long restoration time in case of faults

Overloaded System

Measures: Failed DT replaced within 24 hours

24 x 7 control room to ensure faster restoration

All DTs revamped

overcoming the challenge3
Overcoming the Challenge

Problem: Technical Losses

Issue: Overloaded feeders leading to higher I2R losses

Improper crimping at joints

Poor power factor of the system

Measures: Reconfigured the existing feeders

Added 29 new feeders to the existing 46 feeders

Added 125 MVA distribution transformer capacity

Proper termination and crimping provided

Installed capacitor banks to improve power factor

distribution system

22 KV feeders

Distribution Transformers and FSPs

Distribution System
overcoming the challenge4
Overcoming the Challenge

Problem: High Commercial losses

Issue: Only 23% customers metered

Rampant theft of energy

No substantial action against non payment of bills

Measures: Provide systematic metering for accurately measuring consumption of the customers

Securitization of the network and extensive vigilance

Filing of FIR in case of repetitive power theft

Streamline processes to improve collection efficiency

“Ujjwal Bhiwandi Abhiyan” for legalising connections

ujjwal bhiwandi abhiyan
Ujjwal Bhiwandi Abhiyan

98000 connections since launch of UBA in Sept 07

overcoming the challenge5
Overcoming the Challenge

Problem: Safety

Issue: Lack of adequate clearance with lines

Transformers located at roadsides without any fencing

Double feed through hooking

LT/HT lines in poor condition (conductor snapping)

Measures: Lines replaced by underground cables at critical locationswhere clearance are issue

Earthing provided for all poles, transformers

Removal of double feed

Fencing provided for transformers

Lines replaced, where necessary

Public Safety Awareness programs

overcoming the challenge6
Overcoming the Challenge

Problem: Customer Service

Issue: No concept of customer service

No consumer redressal system

Customers had lost confidence in utility

Measures: Call Center started from Day One

Customer friendly bill introduced

2 Customer Service Centers Opened

Customer Redressal Mechanism established

Mobile Van as a value added service

overcoming the challenge7
Overcoming the Challenge

Problem: Creating Customer Confidence

Issue: Public was instigated againsta private company taking over

No knowledge about Torrent’s capability

Measures: A series of programs with influential citizens informing them about Torrent Power

Direct interaction with Customers through letters

Performance standards widely publicized in direct mailers, cable TV, hoardings

Cultural adaptability – active participation in all festivals

Completing the communication loop through customer feedback - Setup a Customer Advisory Committee

community development activities
Community development activities

Dahi Handi



Iftar Party

Becoming a part of the social fabric

major accomplishments distribution transformer failure rate


Major Accomplishments :Distribution Transformer Failure Rate

At the time of takeover

As on Nov 2010


DT Failure Rate reduced by 37%

major accomplishments load shedding

Less than 3 Hrs

Major Accomplishments : Load Shedding

At the time of takeover

At present

10 to 12


Reduction in losses has improved power reliability in the area

major accomplishments accurate metering


Major Accomplishments : Accurate Metering

At present

At the time of takeover


99% of sales is based on actual reading.

major accomplishments at c loss


12 month



Major Accomplishments: AT&C Loss

At the time of takeover

As on March 10


Reduction of 39%


International Tourist Place

Area : 188 Sqkms

Population : 23 Lacs

Customer base : 2.8 Lacs

Peak Demand : 420 MVA

Energy Input : 1800 MU

33KV OH Line : 230 Kms

33/11KV Substations : 38 Nos

11KV OH Line : 713 Kms

DTCs : 3269 Nos

HT Consumers : 350 Nos

LT Network : 1500 Kms

agra network major issues
Agra Network : Major Issues
  • Power Supply Shortage
    • For distressing the system
    • Bottlenecks in EHV Network
  • Technical shortcomings
    • Inadequate Network
    • Aging T & D Network
    • Highly unsafe Network
    • Significant Overloading
    • Lack of Redundancy
    • Inadequate protection system
    • Inadequate Reactive Compensation
  • Sub-optimal Maintenance
    • Poor Upkeep & Maintenance
    • Complete lack of standardization

Couple of major outages every dayadversely affecting the reliability of supply

agra major issues
Agra : Major Issues
  • Commercial Profligacy
    • Inadequate metering
      • Few consumers with accurate metering
    • Incongruent billing processes
    • Inconsistencies in database
    • High theft & pilferage
      • Many Unregistered consumers
    • Low collection efficiency
    • Huge backlog of new connections and customer complaints
  • High distribution losses
  • Lack of Customer Services
  • Manpower problems
    • Shortage of skilled manpower
  • Complete lack of IT in overall business

Crying need for complete overhaul of the system

key challenges1

Reliability of Supply

Robust, Secured and Safe Network through absorption of latest technologies

Customer Services

Bringing Value added systems and technologies for Customers

AT & C Losses

Bringing efficiency in Network, metering, billing & other Commercial Processes

Key Challenges

… easier said than done … the consumer base, complexity of network & geographical spread being large, it’s a real challenge !!!

key requirements for df arrangement1
Key Requirements for DF Arrangement
  • Huge Capital expenditure is required to renovate and modernize the network
  • Depreciation rates should be as per CERC norms
  • Longer tenure (20 to 25 years) increases the investment by Franchise thereby increasing the pace of reforms
  • Franchise should have appropriate customer mix and have sufficient load to have benefit of scale of operations (Input Energy of 2500 MUs per year)

Area will attract the large and experienced players &

Tenure will attract the required level of investment from them.

key requirements for df arrangement2
Key Requirements for DF Arrangement
  • The required power should be made available
    • Despite the marked improvement brought in Bhiwandi, change not visible as load shedding continues
    • Customers want quality power 24 x 7
    • Availability of adequate upstream infrastructure (Transmission Capacity) to cater to the demand in the franchise area
    • Distributed Generation based Dist Franchisee is a step in the right direction

Franchise should be provided with adequate power so that the benefits of the improvement are realized

key requirements for df arrangement3
Key Requirements for DF Arrangement
  • In Franchise, the overall control lies with Distribution company but to ensure success, independence in operations should be given to Franchisee
    • Right to do Capital Expenditure at its own discretion
      • Only then can a franchisee bring in the required level of improvement in the system which is the main objective of franchising an area
    • Rights under section 126,135 of Electricity Act 2003 to stop theft
    • Non – interference in day-to-day activities

Franchise should be given the rights as long as it follows the orders of Regulatory Commission and the prevalent laws of land

key requirements for df arrangement4
Key Requirements for DF Arrangement
  • Adequate support from the State Discom
    • Manpower (On deputation from Licensee)
      • List of interested employees to be made available to DF
      • DF should have the right to select / reject from the list without assigning any reason
      • Term of Deputation to be mutually decided
      • Employee on deputation cannot go back on their own
    • Coordination with local authorities / Govt. bodies

Support of Govt , Discom and general public is essential for success of DF

key requirements for df arrangement5
Key Requirements for DF Arrangement
  • For certain statutory / regulatory processes, Franchisee should be considered independent of licensee
    • Levy of Service Line Charges
    • Accelerated Power Development and Reforms Programme
    • Regulator has to recognise the locus standi of the franchisee so as to ensure that interests of the customers of the franchise area are protected

Franchisee should have the right to approach the regulator wherever required