Energy Conclave 2006Energy and Sustainable DevelopmentJuly 2006

Slide 2July 2006

Agenda / Contents

• Rural poverty and sustainable development- achievement on MDGs require significant improvement in

the quality and quantity of energy services• Electricity: and the challenge to support growth and equity• Issues in terms of access, security, reliability, and price and

key responses • Local participation in village energy system• Implementation challenges

Slide 3July 2006

Achievements and unfinished Agenda

• 75% villages electrified; but only 46% households have access to electricity (77 million households un-served)

• About 63 lakh poor households (12%) have lifeline access under Kutir Jyoti; but 82% BPL HH are not yet covered

• Per capita usage increased from 15.6 (1951) to 612.5 kWh (2005) but well below developing cos.

• Groundwater irrigation accounts for 70% of irrigated area; but poor quality of supply

0

100000

200000

300000

400000

500000

600000

19

47

I F

YP

(1

95

1-5

6)

II F

YP

(1

95

6-6

1)

III

FY

P (

19

61

-66

)

19

68

-69

IV F

YP

(1

96

9-7

4)

V F

YP

(1

97

4-7

8)

19

78

-79

VI

FY

P (

19

80

-85

)

VII

FY

P (

19

86

-91

)

19

91

-96

19

96

-20

01

20

01

-20

05

20

05

- 2

00

6

0

10

20

30

40

50

60

70

80

90

100

Villaged Electrified % of all Villages

Source: Ministry of Power and CEA – various reports

Slide 4July 2006

Defining requirements

Jaipur Discom

10%

15%

20%

25%

30%

35%

40%

45%

30% 35% 40% 45% 50% 55% 60% 65% 70% 75%

Village Electrification

Dholpur

Saw ai Ma'pur

Jhalaw arBundi

Baran

Kota

TonkJaipur

Alw arBharatpur

DausaKarauli

Jaipur Discom

10%

15%

20%

25%

30%

35%

40%

45%

30% 40% 50% 60% 70% 80% 90% 100%Village Electrification

Hou

seho

ld E

lect

rific

atio

n

Karauli

Baran

Jhalaw ar

Saw ai Mad'pr

Kota

Alwar

J aipur

Dausa,

Dholpur

Earlier Definition: 98% villages electrified across 12 districts of Jaipur Discom• total villages : 14690• electrified : 14401

New Definition: 60% villages electrified but in terms of households, <30% electrified in 12 districts• total villages : 14690• electrified : 8829• rural households : 2.3 million• electrified : 0.68 million

Slide 5July 2006

Source: Sinha 2006

1952

1969 2002 2004

Centralised generation and grid extension

RE programme started

Rural Electrification Corporation formed for financing rural electrification

1973-77

Cross -subsidisation

Flat rate tariff : irrigation pump sets

RE under Minimum Needs Programme (1974)

1980-90

Massive expansion of RE (village electrification)

Kutir Jyoti programme started (1988-89) for rural poor households

1991-93

Private sector participation in power generation opened

Electricity sector reforms started

1996

Act to set up Electricity Regulatory Commission passed

Reforms in Orissa started

1997

1999-2000

Distribution privatised in Orissa

Government emphasises on distribution reforms

Other states corporatise distribution

2000

Electrification of remote villages by MNES

Electricity included in PMGY

Electricity for all by 2012

Rural Electricity Supply Technology (REST) Mission started

2003

Electricity Act 2003 enacted

New RE programme: target of one lakh villages and one crore households in 2 years

National Policy:a. Rural Electrificationb. Distributed generation including renewable

Chief Minister's Conference pass resolution to initiate power sector reforms

Launch of Rajiv Gandhi Grameen Vidyuteekaran Yojana (RGGVY) for complete Household electrification and Village electricity infrastructure

Remote Village Electrification Programme (RVEP) for remote/inaccessible village through Renewable energy

2005-06

RE and sector initiatives

Slide 6July 2006

Key challenges

Financial sustainability• Capital• Operations• Primary energy

Management requirements• Under-managed, commercial

approach• New institutional arrangements• Quality of supply

Demand side and Supply side

Pricing• Residential and Industrial

Targeting • Subsidy• Performance

Slide 7July 2006

Financial viability

Build-up of Rural Supply Subsidy requirement

-

200

400

600

800

1,000

1,200

1,400

Rs

Cro

res

New Consumers; Enhanced Supply 2 9 48 73 222

New Consumers; Existing supply 81 187 281 354 367

Existing Consumers; Enhanced Supply 16 35 106 110 270

Existing Consumers; Current Sp. Cons 613 636 589 516 447

FY06 FY07 FY08 FY09 FY10

Source: Financial model output from one of the state utilities

Slide 8July 2006

Financial viability

Key issues:• Annual financial gap of utilities is

increasing again with higher cost of power purchases, O&M, and financing of past losses

Response:• Business plan (IEP8.1.6)• New institutional framework to

enhance local involvement, scale, and quality of rural supply, and to reduce commercial losses

Responses (cont’d)• Franchisee initiatives must be

supported by capacity building, regulatory, and utility actions

• Notify rural areas under EA2003- competitive distribution- can integrate other renewable

options

Slide 9July 2006

Institutional Framework to support rural electric ventures

Slide 10July 2006

Quality of Supply

Key issues:• Quality of supply differs

across regions• Significant improvement

on standard measures in recent times

• Supply rationing • Cost implications – poor

staff deployment, limited use of productivity tools

Supply Interruptions

0

1

2

3

4

5

6

7

8

9

Rural Semi-Urban

Urban Rural Semi-Urban

Urban Rural Semi-Urban

Urban Rural Semi-Urban

Urban

CPDCL EPDCL NPDCL SPDCL

Nos / Month

ALIFI - Planned ALIFI - Sustained Unplanned

Slide 11July 2006

Quality of Supply

Key issues• Commercial quality

performance lags in rural, semi-urban areas; even as the norms are lax

Complaints Rectified as per Standards

47%44%

92%89%

70%

95%

100% 100% 100%

45%

58%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rural Semi-Urban

Urban Rural Semi-Urban

Urban Rural Semi-Urban

Urban Rural Semi-Urban

Urban

CPDCL EPDCL NPDCL SPDCL

Standards to address metering complaints: Urban: in 7 days; Rural: in 15 days; Replace in 15 days of inspection

Slide 12July 2006

Demand side initiatives

Responses:• Regulatory

- TOD tariffs (IEP6.1.9)- Fuel surcharge pass-through

• Differentiating the Urban and Rural services- Tariffs, metering, subsidy

• DSM incentives- outturn and case for utility

investments

100

61

17

0

39

83

0 20 40 60 80 100

Group - III

Group - II

Group - I

Consumer Benefit Licensee Benefit

Tariff: 0 with DSM, 20 p w/o DSM

Tariff: 20p with DSM, 50 p w/o DSM

Tariff: 100p with DSM, 200 p w/o DSM

100

61

17

0

39

83

0 20 40 60 80 100

Group - III

Group - II

Group - I

Consumer Benefit Licensee Benefit

Tariff: 0 with DSM, 20 p w/o DSM

Tariff: 20p with DSM, 50 p w/o DSM

Tariff: 100p with DSM, 200 p w/o DSM

Group I: Dry Land < 3 connections & Wet Land < 2.5 Acres

Group II: Dry Land > 3 connections & Wet Land > 2.5 Acres

Group III: Corporate & IT Assesses

Sharing of DSM benefit with consumer investment

Slide 13July 2006

Supply side management

Responses • Decentralised supply management

- MBMS: capacity allocation to unbundled Discoms: brings better power procurement and capacity utilisation, scheduling, and load management

- Intra-state ABT and impact on flattening load curve

• Benchmarking and review- Plant performance metrics- Distribution construction and

maintenance standards

IPPs

CPSU

RVUN

Discom

Discom

Discom R't'lTariff

Consumers

RVPN(STU/SLDC)

Discoms'Centre

ReallocatedContracts

Slide 14July 2006

Pricing – Residential and Agriculture

108%

79%76%

74%

61% 61%57%

51%54%

50%47%

124%

107%104%

96% 94%92%

86%89%

91%

84%

79%

39%

38%

31% 35%

34%

36%

34%

33%

33%

33%

31%

0%

20%

40%

60%

80%

100%

120%

140%

FY92 FY94 FY97 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06

Tariff as % of average CoS

Domestic Metered (0-100 kWh) Domestic Metered (300 kWh +) Domestic Unmetered Supply Agriculture

Slide 15July 2006

Pricing - Industrial

Consumption in MU Effective Tariff in Rs / kWh

0

2000

4000

6000

8000

10000

12000

14000

16000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

1

2

3

4

5

6

SEB/Discom Sale Captive Wheeling Average Tariff

Source: PwC analysis

Slide 16July 2006

Cross-subsidies and implications on viability

Note: Size of the bubble represents the energy sales to the category

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

-1 0 1 2 3 4 5 6

Realisation Rs/kWh

Cos

t of S

uppl

y R

s / k

Wh Subsidized

Subsidizing

DOM

AGR

COM

HT 1

HT 2

LT IND

RLY

Key issues• Impact of open

access and retail competition

• Contestable load from 58% (AP) to 80% (RAJ) of HT load

• Experiences from group captives

• Tariff rationalisation and targeting

Slide 17July 2006

Subsidy Targeting

Key issues• Subsidy for lifeline users is poorly

targeted in current slab structure. • Case: 80% of slab 1 consumption

is drawn by users with > 50 kWh. T>COS applied for δ =c-150kWh

Response • Direct payment options (IEP8.3)• Tariff re-design• Time-limited; shift to metered use

20%34%

46%

50 kWh 50-100 kWh > 100 kWh

Lifeline Other than lifeline users

Recovery for consumption in Slab 1

COS = 395, Tariff = 145

34%66%

50-100 kWh > 100 kWh

Recovery for consumption in Slab 2

COS = 395, Tariff = 280

Slide 18July 2006

Performance and Tariff regime

• Prevailing tariff regimes are focused more on minimising disparity than promoting efficient behaviour; need for redesign to long-term performance based regime

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

2002 2003 2004 2005 2006

Licensees' Losses vs. State-wide Licensee BST vs. Avg BST

Slide 19July 2006

In conclusion

• To differentiate institutional arrangements for rural and urban electricity supply

• Change from State “Administered Reforms” to “Stakeholder influenced” reform process

• Change from “Monopoly” to “Competitive Market” by providing choice to consumers

• To address financial, management, regulatory and utility requirements of rural supply for sustainable growth

© 2006 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).

Thank you