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Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
Day-3, Mr. Ajit M. Sharan
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Day-3, Mr. Ajit M. Sharan

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Day-3, Mr. Ajit M. Sharan

Day-3, Mr. Ajit M. Sharan

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  • 1. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa Issues in Distribution and Open Access Ajit M. Sharan
  • 2. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa 1. Financial Sustainability ACS-ARR Gap- As of FY12, the ACS-ARR gap has reached to 2.13 Rs./unit. The increase in ACS-ARR gap could be attributed to the following : • No tariff increase for nine years from 2001-02 to October 2010. Regular tariff increase since last 3 years. • Inadequate RE subsidy due to underestimation of Agricultural sales by the regulator. • Delay in approval of Fuel Surcharge Adjustment (FSA) coupled with long gestation period of 2-3 years for recovery of FSA
  • 3. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa Financial Sustainability • Procurement of expensive power through short term purchases and unscheduled interchange route particularly in FY2009-10 financed through short term borrowings - Election time phenomenon. • Significant increase in employee cost attributable to 6th Pay Commission. • The deficit in the Revenue Requirement converted to Regulatory Assets. The RA/approved gap reached Rs. 2500 cores on 31.03.2013. • High level of receivables in books of accounts amounting to over Rs. 4500 Crs as on 31 Mar 2013. • Operational inefficiencies – High AT&C Losses
  • 4. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa 2. Financial Restructuring Plan • Genesis lies in the factors listed out earlier. • 50% of the short-term outstanding liabilities as on 31st March 2012 (Rs. 7381 Cr. i.e. 50% of Rs. 14762 crores) would be taken over by the State Government, to be first converted into bonds and issued by the respective Discoms to the lenders and then taken over by the State. • Balance 50% of the loans are to be restructured in to long term loans by banks (Rs. 7381 Cr). • As per financial projections of FRP, ACS-ARR gap is projected to be eliminated by FY 2016-17 by AT&C loss reduction and necessary tariff adjustments. • However the cash turnaround shall occur after further 2 years i.e. by 2018-19 owing to repayment burden of restructured loans. • The banks will fund operational losses for initial three years beginning FY 2012 – 2013 on a diminishing scale of 100%, 75% & 50%. • The GOI will provide incentive for accelerated loss reduction.
  • 5. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa 3. Regulatory Intransigence • Non -recognition of Legitimate Expenses by Regulator • Interest on working capital is allowed on normative basis and not at actuals. On an average only 15% of the proposed interest on working capital was allowed by the Commission during FY 2011-12 to FY 2013-14. • Return On Equity : HERC has not been allowing any return on equity to the discoms.
  • 6. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa 4. Inadequate Investments in Infrastructure • As per the CEA, the capital Investment in the power sector should be in the ratio 2:1:2 for Generation, Transmission and Distribution respectively. • Major investments have been made in Generation and Transmission segments in the past where typical project size is large with more visibility. • There has been inadequate investment in Distribution sector over the last few years owing to limited capability of the discoms to raise finances in view of poor financial health. • Investments in Distribution segment have not yielded envisaged benefits, for example Agriculture HVDS scheme in Uttar Haryana Bijli Vitran Nigam with an approximate investment of Rs. 1168 Cr over two years has not resulted in envisaged efficiency gains. • Metering : Various technology options have been tried over the years. Still no perfect solution.
  • 7. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa 5. Load Profiling- Haryana Discoms Consumer Category % Share in Connected Load % Share in feeder level energy input Approxima ted AT&C Losses Key Initiatives to reduce AT&C losses Rural Domestic 30% 17.9% 60-70% Feeder pillar box and Village Supply Improvement Scheme Urban Domestic 30.6% 30-40% R-APDRP Part B investments Commercial 9% 20-30% Industrial 28% 16.3% 10-15% AMR/AMI Agriculture 28% 31.2% 12-15% Feeder Segregation and Ag HVDS Others (PWW/BS etc) 5% 4.0% 20-30%
  • 8. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa 6. Skewed Load Curve • There have been huge variations in intra-day as well as seasonal demand. Figure below shows load curve of Haryana dated 4th July (Peak Load Day- 7881 MW). • During the peak load day off peak load was 6208 MW (78% of peak Load) 5000 5500 6000 6500 7000 7500 8000 8500 0:15 1:45 3:15 4:45 6:15 7:45 9:15 10:45 12:15 13:45 15:15 16:45 18:15 19:45 21:15 22:45 Drawal of Haryana Discoms(MW) on 4th July 2013- Peak Load Day • Flattening of load curve is important to manage long term and short term power purchase portfolio • Discoms have initiated scheme for shifting of Agriculture usage to off peak hours (Pilot Project in Bhiwani & Mahendergarh district) – Concession for consumption during the night hours. 5672 6441 7645 7622 7213 6389 5753 5228 5442 5902 6228 5920 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 Monthly Peak MW Drawl- Seasonal Variations
  • 9. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa 7. Open Access- Issues • Total open access load for Haryana is 510 MW out of which approximately 250MW load is scheduled on daily basis by open access consumers. • Most of the Open Access Consumers resort to price arbitrage on daily basis on the pretext of long term Open Access which imposes difficulty in system planning and power purchase . The power that is contracted keeping in view the peak demand is rendered surplus in off peak hours leading to losses. • The national tariff policy states that “For achieving the objective that the tariff progressively reflects the cost of supply of electricity, the SERC would notify roadmap within six months with a target that latest by the end of year 2010-2011 tariffs are within ± 20 % of the average cost of supply. The road map would also have intermediate milestones, based on the approach of a gradual reduction in cross subsidy. Further NTP also states that “The cross-subsidy surcharge should be brought down progressively and, as far as possible, at a linear rate to a maximum of 20% of its opening level by the year 2010-11.. • The tariff for subsidised categories is not increasing in proportion with that of subsidizing categories and as a result the amount of cross subsidy is increasing whereas the regulator has been reducing the Cross Subsidy Surcharge by 20% each year (40% up to FY 2013 – 14).
  • 10. The 14th Regulators & Policymakers Retreat 1st – 4th August, 2013, Goa Marriott Resort & Spa, Goa Thank You

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