2004 IEEE Inernconal Conference on Flecuc Uliy Deregulation, Restrotring and Power Technologies (DRPT2004) April 2004 Hong Kong
Optimal Zoning for Distribution Sector
Under Deregulated Environment: A Case
Study for the State of Madhya Pradesh, India
Tripla Thakur, $.G. Deshmukh, S.C. Kaushik and S.C. Tripathi
Abaraci~ The selection ofthe number and the location of
ation Companies is one of the most sensitive
decisions to be made during the reforms programme a8 the
decision Is erucal for planners. and experts. This paper
evolves the criteria of zoning for deciding the ses of
Aistribution companies that “would result ia optimum
Performance In the distribution sector. The paper presents
fin overview of the ongoing Distributlon sector reforms in
India and subsequently evolves 2 methodology ilustrated
with a eae study onthe state of Madhya Pradesh, The work
Involved en
numbers, Energy
and consumer categories. These parameters were used in
Conjunction with weightings that were obtained. by
‘employing Delphi study to decide the optimal szing of
Aistribation companies. The evolved methodology f exible
and can be extended (0 include more parameters for
pplication ia ther scenarios.
Index Terms: Delphi study, Distribution
Companies, methodology, parameters, optimum
performance, sector reforms, weighting.
Livrropucrion
Power sector Reforms were introduced in India since
1991.Despite this the power supply position as on March
2002, indicated a peak deficit of 12.6% and energy deficit
of 75% [I]. The Ministry of Power (MoP), India
estimates that the additional capacity requirement to meet
these shortages is about 10,000 MW every year. This
translates iio an myestment of about USB10 billion per
annum [2]. The primary reason forthe widening demand
supply gap lies withthe distribution link. The generation
‘companies have not found it easy to recover their dues
from their biggest buyers, maialy the State Electiity
Boards (SEBs), SEBs suffer huge financial losses every
year due to power thefl, ineffective practices of
billingicollection and policies such as unmetered charges
in agriculture (Nat rates charged based on pump
capacities), and deteriorating O& M status. The result is
:mounting T&D losses that have grown with time (Fig).
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Appatently, the losses have reached an alarming Rs. 260
thousand Million (Rupees 47-US $1) [2] per year. This
has adversely affected the confidence of the private
investors and the existing generation companies.
‘Therefore privatization of distribution sector is reoeiving
paramount attention [3]. The selection ofthe umber and
the location ofthe new Distribution Company (Discom) is
w of the most importance and sensitive decision to be
‘made during the reform prograrame. The paper endeavors
to evolve the criterion for deciding the optimal size of
Discom, The procedure is illustrated fora case pertaining
to the state of Madhya Pradesh wherein the restructuring
process has recently started. The study evolves criterion 19
‘decide upon the Optimal Discom Sizes and spells out the
implications on the total Discom Numbers that are likely
to result in effective distribution of power in the state
spue SERBS pa
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S228 R FEE
1 Pera oF SEs
T.REFORMS IN DISTRIBUTION SECTOR
The distribution system in India is characterized by
ineficiency, low productivity, frequent interuption in
supply and poor voltage. in addition the biggest
fundamental issue hampering the vieblity of the Indian
Power Sector is the sheer volume of T&D losses that
mount 10 25%, a very high level by any standard. To
‘make the matter worse, indirect calculations show T&D
losses to be much higher in the range of 40-50% (2)
Commercial losses are approximately 2/3rd of the total
Joss in distribution. These losses are due to rampant theft
‘and pilferage of electricity, meter tampering, unauthorized
connections and unmetered supply. Almost all
‘commercial losses take place at 11 KV and below, This
situation clearly shows that some fundamental changes
‘are imperative in the working ofthe power sector entities
451 2004 IEEE International Conference on Electric Utility Deregulation, Rest
to realize the vision of “reliable, affordable and quality
power forall by 2012” (4).
IIL, STATUS OF DISTRIBUTION REFORMS ININDIA
India has 28 states and the State Electricity Boards
(SEBs) are responsible for distribution of power except
for a few private players who mainly operate in
‘metropolitan cites catering the need of urban consumers,
‘The restructuring programme of SEBs stated with Orissa
which was the frst stale not only in India but also in
South Asia to implement a comprehensive power sector
reforms programme in 1993. The restructuring
programmed had the active involvement of roulilateral
lending agencies like the World Bank, Department for
Intemational Development, Government of UK (DFID)
and the Asian Development Bank, and several lexding
management consultants [5]. The experience of Orissa has
‘been important to other states in India, which are
restructuring their SEBs more or less on the lines of
Orissa. Delhi is another slate, which has completed one
suecessful year under privatization. A close look at the
performance of reforming states of Orissa, Andhra
Pradesh, Haryana and Delhi reveals that financial
performance of unbundled utilities has improved to
certain extent. These states have taken up the installation
of meters in a big way with the financial assistance from
‘World Bank and Power Finance cooperation (PFC), and
with these measures, the revenue collection has improved.
‘To increase the pace of reforms further inthe distribution
sector, i is required to resolve the issue of liabilities faced
by the distribution companies in the transition period ike
size of distribution companies, valuation of assets of the
reforming uliliies and transfer of existing liabilities,
The six main private distribution utilities in India,
namely, BSES & TEC In Bombay, CESE in Calcutta,
AEC in Ahmedabad, SEC in Surat and NPCL in Greater-
‘Noida are performing beter and caring profits. They are
able to generate adequate intemal resources and are able
to plough back resources into their organizations for
furher growth, All these utilities are primarily catering to
the urban areas, which have a large number of industrial
consumers and few agricultural and sural consumers
Electricity Act 2003 introduced in June 2003 has clearcut
direction for promoting market based structure in the
power sector. All the other states are in the process of
initiating reforms, which will be facilitated by the
Electricity Act 2003 (6)
IV, Mopets ror RestRUCTURING IN DisTRIBUTION
SECTOR
‘The regrouping of distribution system of SEBS ino
more smaller entities has the following advantages
‘ It results into distribution zones of manageable sizes
+ Itallows for comparison of performance across the
zones, and thus generates some level of competitive
‘ latroduction of more players could facilitate
enhancing level of competition in supply of electricity in
the medium to long term,
452
tuturing and Power Technologies (DRPT2004) April 2004 Hong Kong.
*# It permits application of different models of different
‘zones - some zones may be conductive to higher degree
of private participation than others
Depending on the environmental constraints and
timetable envisaged for the process, various
‘optionsimodels consistent with the objectives of the site
e possible, each having varying degree of private sector
pancipaton. Broadly, these models can be divided into
three categories:
Category 1, Models that do not involve private
participation.
© Commerciaization of existing SEB's
Distribution by municipal undertakings/ocel
govemment bodies
Distribution cooperatives (including supply
cooperatives, consumer organizations, ele.)
Category 2. Models for which private
association is limited 1 providing technical
‘managerial inputs.
‘Contracting of services
Management contract
Leasing
Category 3. Models for which fi
‘managerial inputs are available
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