Financial Viability of Distribution Companies in India

1. FINANCIAL VIABILITY OF DISCOMS IN HARYANA
Presentation by
Anil Malik, IAS
Managing Director,
UHBVNL
July 2014

2. 2
Financial Position of the Discoms in Haryana

3. 3
FINANCIAL CONDITION OF HARYANA DISCOMS
AS ON 31.03.2012 – CUT OFF DATE FOR FRP
 Accumulated losses of Rs. 19710 Crs as of 31st March 2012.
 UHBVN-Rs. 12423 Crs
 DHBVN- Rs. 7286 Crs
 Working Capital borrowings as on 31st March 2012 amounted to Rs.
12670 Crs
 UHBVN -8762 Crs
 DHBVN-Rs. 3907 Crs
 Interest and finance charges incurred during the year FY 2011-12
amounted to Rs. 1627 Crs.
 UHBVN- Rs. 1083 Crs
 DHBVN- Rs. 544 Crs.
 AT&C losses in FY 2011-12 : 30.34% (for combined discoms)
 High level of ACS-ARR gap: Rs. 1.52 per unit

4. 4
REASONS FOR FINANCIAL DISTRESS
 Regulatory Reasons
 No tariff increase for nine years from 2001-02 to 2009-10.
 Delay in approval of FSA coupled with staggering of recovery of FSA over 3-4
years.
 Significant disallowance of costs by HERC in the ARR orders. (~only 33% of Interest
& Finance charges allowed by Commission during 2011-12 to 2013-14)
 Deficit in the revenue requirement (ARR) was bridged through creation of
Regulatory Assets/acknowledgement of uncovered revenue gap rather than tariff
increase. The borrowings against this regulatory asset/gap further increased the
debt servicing cost.
 Inadequate RE subsidy due to disallowance of Agricultural sales
 Other Reasons
 High level of AT&C losses
 Expensive procurement of power through short term purchase and unscheduled
interchange mechanism particularly in FY2009-10.
 Due to poor financial health of Discoms banks stopped funding in June 2011
 Significant increase in employee cost attributable to 6th Pay Commission.
 Massive receivables in books of accounts due to socio-political factor amounting
to over Rs. 4900 Crs as on 31 Mar 2012 (UHBVN & DHBVN).
 Inadequate Capital Investments to control system losses.

5. 5
Highlights of FRP scheme of GoI

6. 6
HIGHLIGHTS OF FRP SCHEME OF GOI
The scheme was aimed at restoring the financial health and commercial viability of
the State Discoms.
Key Covenants :
 50% of the short-term outstanding liabilities as on 31st March 2012 would be taken over by the
State Government, to be first converted into bonds and issued by the respective Discoms which
would be taken over by State Govt.
 Balance 50% of the loans are to be restructured by banks by providing a moratorium on the
principal (3 yrs) and extending best possible terms for repayment (repayment in 7 years after
moratorium)
 Banks to finance discoms on a diminishing scale for a period of three years only (100%,75%&50%)
 Transitional Finance Mechanism (TFM) by Central Government:
 Incentive by way of capital reimbursements support of 25% of principal repayment by the state
government on the liability taken over by the state government under the scheme. The amount to be
reimbursed only in case the state government takes over the entire 50% of the short term liabilities
outstanding as on 31.3.2012.
 Grant equal to the value of additional energy saved due to loss reduction at a higher rate
than the R-APDRP mandated reduction (3% p.a. For utilities above 30% and 1.5% for others)
 The eligibility of grant would arise only if the gap between ARR and ACS for the year has been
reduced by at least 25% during the year judged against the benchmark for the year 2010-11

7. Mandatory conditions under FRP scheme and compliance
7
thereof

8. 8
STATUS OF COMPLIANCE OF MANDATORY CONDITIONS
& RESPONSIBILITIES UNDER FRP SCHEME
Discoms Remarks
•Audited accounts for FY 11 to be
finalised by 30.11.12 and for FY 12 by
31.01.13
•Filing of tariff petition with SERC on
time so that tariff order may be issued
by April
•Roadmap for Private Sector
participation through Franchisee
arrangements
•Submission of time bound plan for
liquidation of regulatory assets
•Fixation of target for progressive
reduction in short term power
purchase.
• Completed
•Tariff Orders for 2012-13 and 2013-14 issued prior to
31 Mar 2012 and 31 Mar 2013 for effect from 1 April
2012 and 1 April 2013 resp.
•Efficiency Improvement envisaged through present set
up only.
•Liquidation of regulatory assets ordered by the HERC
over 3 years (liquidation of 45% of regulatory assets i.e.
Rs. 1042 cr. allowed in tariff order for 2013-14)
•Adequate long term power purchase agreements are
in place for the Discoms. A power surplus situation
presently exists and is visualized to continue up to
2018-19

9. 2013-2014
(tentative)
Rs. per unit base year
As per the FRP (1.52) (0.84) (0.54)
(0.81)**
(up to
December
only)
9
STATUS OF COMPLIANCE OF MANDATORY CONDITIONS
& RESPONSIBILITIES UNDER FRP SCHEME
Discoms Remarks
•Prepaid meters to be installed for all Govt. Consumers
and consumers above 1 MW where defaults have
occurred or direct release from the budget.
•Reduction of ACS-ARR gap by 25% annually judged
against the benchmark for the year 2010-11.
•Funding of operational losses shall be available for the
first three years i.e 2012-13, 2013-14 and 2014-15
•Reduction in AT&C Losses
•Scheme being formulated for direct transfer from the
State Budget. (Current bills being paid by the
departments, arrears to be liquidated post reconciliation)
• ACS-ARR gap reduction is being achieved from FY
2011-2012 to FY 2013 – 2014.
ARR - ACS Gap 2011-2012 2012-2013
As per the actuals (1.52) (1.01)
•Banks have sanctioned loans of Rs. 3500 cr., 3209 cr. &
3467 cr. for FY 2013, FY 2014 & FY 2015 respectively
under the FRP.
•Discoms are on track and are broadly achieving the
desired loss reduction.

10. 10
STATUS OF COMPLIANCE OF MANDATORY CONDITIONS
& RESPONSIBILITIES UNDER FRP SCHEME
HERC Status of Compliance
•Notification of Tariff Order for FY 2012-13
should have been issued before FRP approval
•Future Tariff Orders to be issued by 31st March
of each year, as per model tariff regulations
•Revised tariffs be made applicable w.e.f. 1st
April of each year
•APTEL judgment dated 11th November 2011 to
be complied with and compliance report to be
filed as per directions of the APTEL.
1. Allowing Fuel Surcharge Adjustment (FSA) to
offset increase in power purchase cost
2. Regulatory Asset be recovered within a
period of 3 years
•In-Principle approval required to be given
•Tariff Order for 2012-13 has been issued on 31 March 2012.
•Tariff Order for 2013-14 has been issued on 30 March 2013.
•Tariff Order for 2014-15 has been issued on 29 May 2014.
•Implemented from 1st April of each year
•Automatic pass-through of FSA on quarterly basis is applied
as per HERC’s MYT Regulations.
•Recovery of Regulatory Assets allowed over 3 years by the
HERC (recovery of 45% of Regulatory Asset implemented
through tariff order 2013-14)
• In-Principle approval received

11. 11
STATUS OF COMPLIANCE OF MANDATORY CONDITIONS
& RESPONSIBILITIES UNDER FRP SCHEME
State Government Remarks
•Takeover of bonds issued by Discoms equal to 50% of
short term liabilities (STL) and providing support in
payment of interest and repayment of principal – If fiscal
space is not available with the State, then the takeover
may be staggered over the next 2-5 years.
•Provide State Government guarantee for loans/bonds to
be raised/issued by Discoms
• Bonds of 7366.60 Cr issued to Banks and the liability of
servicing these bonds has to be borne by the State Govt.
The Govt. is providing funds to the discoms for paying
interest on these bonds.
•Guarantee against bonds of Rs. 7366.60 crores issued.
Further all the loans including the restructured loans and
the fresh loans under the FRP have been guaranteed by
the State Government.
Out of Short term liabilities of Rs. 14763 cr. (incl. working
capital loans of Rs. 10269 cr & power purchase payables of
RS. 4494 cr) as on 31.03.2012, the State Govt. has taken
over Rs. 7366 cr. (approx. 50%). Thereafter in FY 2012 –
2013 the committed funding of Rs. 3509 cr. has been
released. The sanctioned loans for the FY 2013 – 2014 are
being drawn. As on 31.03.2014 total working capital loans
of Rs. 8406 cr are outstanding from the banks (excl.
REC/PFC loan of 8500 cr., capex loans of 3430cr.)

12. Sr. No. Name of Department As on 31.03.2014
12
STATUS OF COMPLIANCE OF MANDATORY CONDITIONS
& RESPONSIBILITIES UNDER FRP SCHEME
State Government Remarks
•All outstanding dues from Government
departments for electricity supply to be paid
before 30.11.2012 .
•Amount of subsidy in arrears to be paid before
31.03.2013.
•The discoms and FD are working on a operational
modalities for direct transfer of the electricity bills
of Govt. departments from the budget.
1 Irrigation 23989.02
2 Municipal Committees 5943.93
3 Panchayat 997.06
4 Public Health 13737.44
5 MCFaridabd 1294.07
6 Others [for UHBVN] 1178.77
G.Total 47140.29
• The State Govt. is expected to liquidate the
arrears of subsidy over a period of 1 – 2 years
besides making the payment of current subsidy
regularly. (Current outstanding is about Rs. 1800 cr)

13. 13
Targets of FRP and Progress so Far

14. 14
FRP TARGETS
Haryana FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Distribution
Losses
26.10% 23.80% 22.00% 20.30% 18.70% 17.40% 16.00% 15.10% 14.20% 13.40%
AT&C Loss
Trajectory
31.35% 29.71% 26.82% 24.40% 22.23% 20.41% 18.83% 17.12% 15.80% 14.78% 13.59%
ARR-ACS Gap
(on billed units basis)
-2.3 -1.57 -0.64 -0.83 -0.22 0.28 0.48 0.59 0.63 0.72 0.78
Tariff Increase considered (in %)
Year Tariff Increase Considered (%)
UHBVN DHBVN
2015-16 15 15
2016-17 10 10

15. 15
SYSTEM GENERATED DISTRIBUTION AND AT&C LOSSES
OVER THE LAST 3 YEARS
FY 2011-2012
(First Half)
FY 2011-2012
(Second Half)
FY 2011-
2012
FY 2012-2013
(First Half)
FY 2012-2013
(Second Half)
FY 2012-
2013
FY 2013-2014
(First Half
FY 2013-
2014 (Q 3)
Distribution Loss
UHBVN 36.28% 27.56% 32.43% 35.86% 27.94% 32.47% 35.04% 28.39%
DHBVN 22.91% 23.29% 23.09% 23.22% 21.95% 22.60% 23.49% 22.99%
DISCOM 29.65% 25.27% 27.62% 29.76% 24.70% 27.44% 28.91% 25.36%
Target Distribution Losses
as per FRP
27.56%
(Base)
26.14%
(Base)
23.8%
(yearly)
Collection Efficiency (%)
UHBVN 91% 96% 93% 91% 97% 94% 95% 93%
DHBVN 97% 100% 99% 97% 100% 98% 97% 97%
DISCOM 94% 98% 96% 94% 98% 96% 96% 95%
AT&C Losses
UHBVN 42.01% 30.56% 36.95% 41.39% 30.10% 36.56% 38.28% 33.40%
DHBVN 25.00% 23.14% 24.11% 25.67% 22.26% 24.01% 25.90% 25.65%
DISCOM 33.58% 26.58% 30.34% 33.80% 25.86% 30.17% 31.72% 29.05%
Target AT&C Losses as per
FRP
31.35%
(base)
29.71%
(base)
26.8%
(yearly)
Loss reduction from 29.76% in first half of 2012-13 to 28.91% in first half of 2013-14 may seem to be 0.85% but in
fact it is around 3 % owing to Impact of increased supply hours to RDS consumers

16. 16
OTHER PARAMETERS
DISCOMS
FY 2011-2012
(First Half)
FY 2011-2012
(Second Half)
FY 2012-2013
(First Half)
FY 2012-2013
(Second Half)
FY 2013-2014
(First Half)
RIB per unit of input 2.43 2.79 2.70 3.55 3.53
Increase over the
corresponding period in the last
year 11% 27% 31%
The increase in the Revenue in Banks (RIB) over units input (units purchased &
paid for) has increased more than the per unit increase on account of tariff /
FSA which clearly shows that the AT&C losses have decreased.
ARR - ACS Gap (on input units basis) 2011-2012 2012-2013
2013-2014
(tentative)
Rs. per unit base year
As per the FRP (1.52) (0.84) (0.54)
As per the actuals (1.52) (1.01)
(0.81)** (up to
December only)

17. 17
Other Initiatives

18. 18
INITIATIVES IN ENERGY AUDITING
 Targets for Revenue on the basis of Units purchased and actually paid for.
 Scientific methodology of assigning revenue targets to the field offices.
 Targets based on normative sector-wise distribution losses (urban – 15%, industry
– 4%, Agriculture – 16%(non HVDS areas) & 8%(HVDS areas), rural - 30%) and
more than 100% collection efficiency because of targets for liquidation of
receivables.
 Periodical refinement of targeting methodology right up to the sub division on the
basis of actual data of the previous month.
 The distribution losses are calculated using the sales data generated by the billing
data and the agriculture consumption is based on HERC methodology using
feeder data and normative distribution losses (For estimating the agricultural
consumption the HERC is taking input energy on the segregated agricultural
feeders and applying losses of 16% thereon )
 Monthly review of the achievement vis-à-vis targets.

19.  Metering is heart of power distribution business and directly affects the revenue. Nigam has proposed to
eliminate human intervention in metering process by roll-out of AMR and CMRI based meter reading through
optical port. The meters are being procured.
 Automatic Meter Reading (AMR) has been implemented for HT Industrial Consumers in UHBVN.. A dedicated
analytical team has been constituted to do a detailed analysis of the AMR billing data and generate exception
reports.
 85000 consumers in DHBVN having connected load of more than 10kW are proposed to be covered under the
AMR (Automated Meter Reading) under the World Bank funding scheme and tendering process has been
initiated. Till the time AMR is implemented, Discoms have planned to conduct CMRI based meter reading for such
consumers using optical port for data analysis and identification of tampering events. Discoms are also planning
to conduct CMRI based meter reading in identified pockets for consumers having connected load in excess of
10kW.
 Meters are being shifted to electricity poles out side the consumer premises so as to avoid any tampering of
energy meters. Almost all the three phase meters have been relocated outside the consumer premises and the
single phase meters are likely to be shifted by the end of September in the urban areas..
19
INITIATIVES FOR IMPROVING BILLING EFFICIENCY
Meter Relocation
DISCOM
Single Phase Three Phase CT/PT Status ending June 2014
Nos. of
Single Phase
meters
[Urban Only]
Nos. of
Meters
relocated
Nos. of
Three
phase
Meters
Nos. of
Meters
relocated
Nos. of CT/PT
Meters
Nos. of
Meters
relocated
Total Nos.
of Meters
Total meters
relocated
Percentage
UHBVN 1145763 535188 136460 132552 19804 19804 1302027 687544 52.81%
DHBVN 1103093 747466 210381 168975 23599 23590 1337073 940031 70.31%
Total 2248856 1282654 346841 301527 43403 43394 2639100 1627575 61.67%

20. Single Phase Three Phase
87523 98031
41611
Defective
meters
ending June
20
INITIATIVES FOR IMPROVING BILLING EFFICIENCY
Replacement of defective Meters – Progress is given as under (as on 30.06.2014) :
 All the defective meters are proposed to be placed within 6 months.
UHBVN DHBVN
91169
Defective
14555
meters ending
March 2013
71064
13867
Progressive
Meters
defective
during April
2013 to March
2014
Single Phase Three Phase
93938
27007
Progressive
Meters
replaced
during April
2013 to March
2014
68295
1415
Defective
meters ending
March 2014
16777
3619
Progressive
Meters
defective
during April
2014 to June
2014
25746
4013
Progressive
Meters
replaced
during April
2014 to June
2014
59326
1021
Defective
meters ending
June 2014
Billing Data Analysis - Exception Reporting
145305 105671 106565 144411
41758
Defective
meters
ending
March 2013
20181
Progressive
Meters
defective
during April
2013 to
March 2014
18553
Progressive
Meters
replaced
during April
2013 to
March 2014
43386
Defective
meters
ending
March 2014
41143
9273
Progressive
Meters
defective
during April
2014 to June
2014
11048
Progressive
Meters
replaced
during April
2014 to June
2014
2014
 Billing of all the major consumers is being pre audited centrally and analyzed by a dedicated analytical team based on
suspicion against the benchmark consumption norms, reading unavailable/not readable, etc cases to verify any billed
quantum of energy. Following table provide under billing from select suspected consumers in UHBVN.
 The billing of all the major consumers including mobile towers is being pre audited centrally and analyzed by
dedicated analytical team. Key outcomes of energy audit include reduction in faulty metering status and increase in
revenue.
 Discoms have also implemented a software throughWEEXCEL in which the entire billing data is available on a real time
basis to the officers of the Nigam and customized billing exception reports can be generated to target under billing.

21. INITIATIVES FOR IMPROVING BILLING EFFICIENCY
Cross Checking of meter reading by M/s HESL
 M/s HESL is employed to perform sample verification of 5% of the meter readings of industrial consumers
along with collecting data pertaining to equipments being used in the premises. HESL has also been
entrusted with responsibility to collect consumption data of NDS consumers on specific formats on various
fields (i.e. complete address, no. of ACs/ Geysers installed, nature of business etc.) for identification of
suspected meter tampering cases. The data of all the consumers has been collected and is being punched.
 In UHBVN 1448 cases of accumulation of reading have been detected in the month of March 2014. Similarly,
in DHBVN, 867 cases of accumulation of reading have been detected in February 2014 with the amount
charged of around 48 Crores.
Feeder Indexing
 Feeder indexing is underway in both the Discoms and the work is 95% complete. Post feeder indexing, each
feeder shall be designated as profit center and feeder wise targets shall be communicated to field staff for
targeted loss reduction. One sub division per circle is being given feeder wise RIB targets to begin with and
after the completion of the indexing the scheme of feeder based targeting shall be rolled out in all the circles.
Feeder Pillar Scheme
 Feeder Pillar Scheme to reduce theft and improving billing efficiency in rural which is motivated by giving
various incentives to the consumers like giving supply hours on urban pattern, 10% rebate in energy bill for
one year wherever the scheme is implemented on complete feeder. Currently feeder pillar has been
implemented on 90 villages and thereafter the scheme has been stopped.
 Wherever the schemes has been implemented, average AT&C loss have been reduced significantly, via
21
increase in collection efficiency by around 20%, reduction in input energy by around 30%.

22. 22
INITIATIVES FOR IMPROVING BILLING EFFICIENCY
 Spot Billing:
Currently the circles of Rohtak, Panipat (Model Town), and around 30 sub-divisions of DHBVN have the facility of
spot Billing. Precisely, Spot Billing has already been started in 36 APDRP towns
 Theft Detection – Theft detection has been made proactive. Implementation of mandatory lodging of online FIRs
have improved quantum of detection and disposal of cases.
52237
Number of theft cases detected
30162
20138
25160 24293
FY 2011-12 FY 2012-13 FY 2013-14
4610
Penalty Recovered (in Rs. Lakhs)
3096
1st Half
 During First half of FY 2013-14, near about 10% more theft cases were detected in comparison to 2nd half of the
year.
 In FY 2013-14 First half, ~ 17% more penalty amount recovered from theft cases than in the 2nd half.
4001
3502
2871
FY 2011-12 FY 2012-13 FY 2013-14
2nd Half
1st Half
2nd Half

23. 23
STATUS OF REGISTERED FIR CASES AND AMOUNT REALIZATION :
FIR regestered (No's) Amount Realized (Cr.)
 FIRs made Online
 Max. No’s of FIR (2878) were registered in Oct-13 while max. Amount realized (7.55 Cr.) in Nov-13
month.
 Both- FIR registration and amount realization reported to step down in 2nd Half of the year.

24. Progress during Sep'13-Feb'13
Rate of increase
in Amount
Urban -11.81% -17.82%
Rural 4.71% 5.36%
Total 0.04% 0.83%
24
INITIATIVES TO IMPROVE COLLECTION EFFICIENCY
 Discoms have recently initiated drive for accelerated arrear recovery by targeting all connected defaulters in
the decreasing order of default in order to liquidate the entire defaulting amount of urban connected
consumers .
 If persistent efforts to recover dues don’t suffice, then disconnection is put to effect. Table below provide
latest snapshot of recovery from connected defaulters.
Discoms
Rate of
increase in
defaulting
Consumers
753698
297295
234606.85
56983.98
789206
262174
247187.09
46827.15
Urban Rural
No. of Consumers Amount (Rs. Lacs) No. of Consumers Amount (Rs. Lacs)
Total Connected Defauting Amount as on 30.09.2013 Total Connected Defauting Amount as on 28.02.2014
 Moreover, as per the HERC Supply Code Regulations 2014, in case the consumer fails to make the timely
payment of the bill, the bill in the next billing cycle shall be prepared on a distinct colour paper(red) along
with a notice, highlighting the unpaid amount and in case the amount is not paid within the due date, the
supply shall be disconnected without any further notice.

25.  Most of the unresolved complaints are due to incomplete information supplied by consumer in their complaint
 Consumer can also lodge his complaints/grievances by sending an E-Mail to uhbvncgrs@gmail.com and
25
CONSUMER GRIEVANCE REDRESSAL SYSTEM
 Customer facilitative call centre has been set up in the state of Haryana.
 Email and SMS facility for online registration of complaints in website.
 Online Application Facility for consumers who wish to opt for 10 KW or more of Connected Load
through SMS/ Portal. A UHBVN Consumer can lodge his complaints/grievances by sending SMS to 51969.
dhbvncgrs@gmail.com, complaintcellhpu@gmail.com & complaintcellhpu@yahoo.com
 Web/ Online Consumer Grievance Redressed System URL:
 Around 2 lac complaints have been handled in last one year.
Sr.
http://173.201.36.72/uhbvn/portal/home/go/processGroupListWeb.jsf and
http://173.201.36.72/dhbvn/portal/home/go/processGroupListWeb.jsf
Mode of Complaints
Total Received
(No’s)
Total Resolved
(No’s)
Total Pending
(No’s)
1
Call Center
[1800-180-1615] 238254 238254 Nil
2 Online Consumer Grievances redressal System 50754 49136 1618
3 Online Harsamadhan Portal of State Govt. 516 450 66
4 Complaints received through SMS 1054 465 589

26. 26
WAY FORWARD
 The State Govt. should release the entire subsidy in time upfront
 The electricity bills of Govt. departments to be released timely
 Autonomy to the Discoms for Performance based transfers
 Cost reflective tariffs to be allowed by the Regulators
 Regulators should allow all the legitimate costs in the ARR (i.e. interest on
working capital loans, increase in employees cost due to recruitments) and
not to underestimate costs / overestimate revenue to keep the deficit low so
that there is minimal tariff increase.
 Online FIR system over Theft detection for loss reduction be allowed
 Enforcing disconnections of defaulters
 Pillar boxes for rural connections
 Meter relocation in urban areas
 CMRI/AMR/Spot Billing endeavors
 External and internal tie up for capital expenditure funding be supported. For
ex. Funding prospects from JICA and World Bank
 Extension of R-APDRP in non R-APDRP – Metering, Billing, Collection in non-
RAPDRP towns on the pattern of RAPDRP areas proposed to be completed by
December 2014.

27. 27
Thank You