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Industry and Transaction Review ConferenceThe Reductions in Aggregate Technical and Non-Technical Loss Approach to BiddingArifMohiuddin November 28, 2011
Outline • Purpose for the Disco Transactions • ATC&C Defined • Method of ATC&C Bid Evaluation • Post-Privatisation • Conclusion
Purpose for the Disco Transactions • The PHCN Successor Distribution Companies are characterized by high levels of Technical, Commercial and Collection Losses • The key objectives are to • reduce losses • increase connectivity and access to power through enhanced investments • provide reliable power supply • provide clear parameter for assessing operators
ATC&C Defined • ATC&C is defined as the Aggregate Technical, Commercial and Collections Loss of a Distribution Company • This is the difference between the amount of electricity received by the Distribution Company and the amount received from customers
ATC&C Defined Example: • Disco Receives 100 MWh of electricity from Transco in a particular month • Disco Bills consumers $90 for 90MWh • Disco Collects $80 from consumers for that month
ATC&C Defined • The Aggregate Technical and Commercial Loss is therefore: 1 – (90 MWh/100 MWh) = 0.1 or 10% • The Collections Loss is therefore: 1- (80/90) = 0.11 or 11%
ATC&C Defined • The collection loss only occurs on the 90% of the electricity that was billed for • To get the ATC&C we will multiply the collection loss by 0.9 and add it to the Aggregate technical and commercial loss ATC&C loss = 0.1 + 0.9x0.11 = 0.2 =20%
Method of Bid Evaluation • Bidders will Bid on the relative reduction in losses For Example • If a bidder bids to reduce the loss by 10% in year one that means • If the present loss is 50%, the bidder would be expect to reduce the loss to 45% (i.e. 1- (50 x .1) = 45)
Method of Bid Evaluation • Each bid will contain a proposed 5 year loss reduction trajectory • Bids will be evaluated based on the lowest end level in losses for a particular distribution company
Method of Bid Evaluation • Assume a Disco currently has an ATC& loss level of 35%
Method of Bid Evaluation- Experimental Case We expect the loss reductions during control period to be on accelerated Basis
Post-Privatisation • Any increased level of required investments would need to be agreed with NERC • As tariff is based on targeted loss, • failure to reach the loss target level will trigger loss of profit • Exceeding loss target will trigger higher profit • If bidders consistently do not meet their loss reduction targets, NERC may further decide to revise the capex amounts allowed for a bidder under their tariff
Conclusion • FGN is determined to have successful Disco transactions • Further measures are being considered • to attract credible and serious operators only • to avoid unrealistic and unachievable loss targets
Thank youQuestions:email@example.com November 28, 2011