case study let there be light

Case study

Let There Be Light

Summary of the case

bull Traditionally power plants being capital intensive have been set up by the public sector and state electricity boards(SEBs) in India

bull This energy sector is the major infrastructure bottleneck holding economic development

bull The reforms made in this sector has affected almost many states in India

bull Common reforms are- corporation by breaking the SEB into generation transmission and distribution

bull Financial restructuring including debt and interest payment rescheduling

bull Reduction of manpowerbull Improvements in operational efficiency

bull The ruling party irrespective of whether it is congress at present or the BJP earlier made pre-election promises of supplying free-or heavily subsidized power

bull Dig Vijay Singh the present chief minister of Madhya Pradesh no longer sees electoral benefit in providing free electricity

bull ldquo It pays to payrdquo is his refrain

Reforms made in MPSEB

bull MPSEB is to be divided into generation transmission and distribution and supply companies

bull Financial Management and cash flow management to be improved

bull The retirement of the employees have been reduced from 60 years to 58 years

bull Effective operational control is sought to be exercised by metering power supply at divisiondistrict level to fix responsibility for Tamp D losses and power thefts

bull Sustain drive is on to identify non ndashpaying consumers install meters and make them pay bill regularly

Question

bull Analyze the problems of the MPSEB from the strategic management perspective Do you feel that the actions taken or being contemplated are strategic in nature Propose what else needs to be done to make the MPSEB a viable organisation

bull 1 Introductionbull 2 Historical evolutionbull 3 Regulatory Processbull 4 Challengesbull 5Conclusion

Overview of the Case

INTRODUCTIONMP Power sector-snap shotbull Installed capacitybull Thermal-26475 MW (PLF-7054 ) Hydel-903 MWJoint venture (Narmada)bull NHDC- 1525 MW Sardar Sarovar-8265 MWbull EHV lines- 209491 Ckt Km HT lines-199868 Ckt Kmbull EHV transformers-248545 MVA HV transformers-11399 MVAbull HTLT Ratio-06 Dist Transformers-17056 MVAbull No of consumers-6656000 Village Electrification-975 bull Per capita consumption-320During Rabi seasonbull Peak demand (unrestricted) 7200 MWbull Availability 6200 MWbull Load shedding 1000 MW

Historical evolution

bull Electricity came to Madhya Pradesh in 1905 at Gwaliorbull Licensees were supplying electricity in urban areas of Madhya

Pradesh during pre-independence period and till formation of MPEB

bull MPEB worked in the State since 1111956 Under provisions of Electricity (Supply) Act 1948

bull MPEB played a major role in spread of electricity network in the State

bull MPEB ceased to exist in November 2000 when State was bifurcated into Madhya Pradesh and Chhatisgarh

bull MPSEB started its functioning thereafter in thesuccessor State of MP

bull Historical evolutionbull -Some statistics for Undivided MP

(MP+Chhatisgarh) 1956 2000bull No of Energized pumps 265 1298108bull No of Villages Electrified 136 68346bull Installed capacity MW 815 42607

MPEB performance

bull MPEB was one of the best performing SEBsbull Around Nineties its performance started deteriorating and financial crisis loomed large on MPEBbull Due to rapid rural electrification the consumer mix in the State changed but the tariff determination was done as an extension of past principles and practicesbull Tariff setting virtually shifted to State Government from

MPEBbull State Government acting as a welfare State could not

follow Commercial principles in tariff setting

Regulatory Process

Autonomybull 1048698 Legal provisions for autonomy exist in Electricity Act 2003bull 1048698 SERC is a Quasi Judicial body- has powers to summon and

enquirebull 1048698 Provision of separate SERC fund through which expenses

are metbull 1048698 Apart from legal provisions autonomy is also about

mindset- Regulators need to function with such mindsetbull 1048698 MPERC has always worked with an autonomous mindset-

it has even defined the manner of payment of Government subsidy through regulation

Transparency1048698 Public hearing conducted for tariff determination1048698 All draft regulations are placed on web-site inviting suggestions

objections- public notices in News papers also issued1048698 Before proceeding with new and important issues Discussion

papers are placed on web-site inviting suggestions objections- public notices in News papers also issued

1048698 State Advisory committee includes all stake-holders and interest groups eg industries NGOs

1048698 MPERC organizes frequent interactions with electricity companies amp stake-holders and adopts consultative approach

Accountability

1048698 Functioning with sense of responsibility1048698 Fixing and monitoring accountability in the power sector1048698 MPERC through its regulations has laid down framework for

accountability1048698 MPERC conducts regular reviews to monitor performance against expectation1048698 MPERC has framed separate regulation for compliance monitoringminus One Director (Regulatory Enforcement)minus Each Discom has one Reporter of complianceminus Suo Motu Petitions to enforce accountability

Crisis unplugged

bull MPEB pulled on with commercial losses and cash crunch showing Government subsidy as recoverable to bridge the revenue gap in books of accounts

bull Cash crunch adversely affected capital works and even Repair amp Maintenance work

bull Due to power cuts and poor quality of supply and rising burden of cross subsidy industries shifted to captive plants which adversely affected the consumer mix and financials

bull Bifurcation of State came as a bolt from the blue which almost derailed the power sector in MP

Adverse impact of division of MPEB

bull Division MP Chhattisgarhbull Installed capacity 68 32bull Consumption 78 22bull Revenue 64 36bull Irrigation pumps 94 6

Electricity Reforms

bull State Government constituted MPERC on 18898 under ERC Act 1998

bull Chairman and Members of MPERC appointed in 1999bull MPERC started functioning in 1999 and delivered its first decision setting aside tariff revision enforced by MPEB wef 131999bull MP Vidyut Sudhar Adhiniyam 2000 enacted on 3rd July 2001bull MP Urja Adhiniyam 2001 enacted to curb unauthorised

use of electricity

bull MPERC started defining rules of the game by putting regulations in place

bull First Tariff order was delivered on 25092001bull Unbundling of MPSEB was made effective on 1st July 2002bull Initially Companies started as Operation amp Management

agents for MPSEBbull Autonomy given to Companies from 1st June 2005 subject

to central cash flow mechanismbull Provisional balance sheets assigned to Companies by the

State Government

Commissionrsquos initiatives towards consumerprotection and improvement in services

1048698 Consumer complaint redressalbull minus Establishment of Consumer Redressal Forumsbull minus Intervention of Electricity Ombudsmanbull minus Online review of status of complaints lodged with the Forums

from 11081048698 Establishment of Central Call Centers1048698 Online registration of complaints at Call Centers1048698 Spot Billing at select cities1048698 Facility of 24 hours bill payment at select cities1048698 Involvement of NGOs on consumer issuesminus 120 NGOs registered with MPERCminus Workshops for NGOs to create awareness amongst consumers

bull Market development approachbull 1048698 Open access and intra state ABTbull 1048698 ToD meteringbull 1048698 DTR metering Own Your Transformer schemebull 1048698 Price signals for energy efficiency load factorbull improvementsbull 1048698 Support to Discoms to go for franchiseebull 1048698 Support to Genco to Renovate and Modernizebull its old plantsbull 1048698 Cost plus tariff and performance basedbull incentives

Strategic Measures To be followed 1048698 MPSEB have to work towardsminus Meeting the challenge of providing power to all by 2012minus Enforcing customer orientation in utilitiesminus Supporting investments and all actions that bring in efficiency and

delight consumersminus Achieving Energy efficiencyminus In-discriminatory Open accessminus Facilitating Power exchangesminus Developing market for Merchant power plantsminus Facilitating Renewables and CDM (Green amp Clean Technologies)minus Creating Auxiliary services market- Start up power reactive power etc

minus supply of electricity to all areasminus protection of interest of consumers and other

stakeholdersminus supply of reliable and quality power of specific

standards in an efficient manner and at reasonable rates

minus development of power market to bring in the element of competition and efficiency

minus providing alternatives for licenseeconsumers to reduce tariff in the long run

challenges

bull Protest from local governmentbull Indiarsquos poor infrastructurebull Poor public image ndash predatory pricing

unemploymentbull Indiarsquos diversity and heterogeneity

bull Regional governments are very strong politically

Conclusion

bull Thus the government must aim to ensure availability of electricity to consumers at reasonable and competitive rates

bull TP lays down framework for determination of tariff in such a manner which will bring in improved efficiency in the power sector reaching out benefits to the consumers

bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19

Commissionrsquos initiatives towards consumer protection and impro

Slide 21

Strategic Measures To be followed

Slide 23

challenges

Conclusion

Slide 26

Summary of the case

bull Traditionally power plants being capital intensive have been set up by the public sector and state electricity boards(SEBs) in India

bull This energy sector is the major infrastructure bottleneck holding economic development

bull The reforms made in this sector has affected almost many states in India













Question














MPEB performance




Regulatory Process











Accountability



Crisis unplugged







Electricity Reforms



use of electricity





State Government












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26













Question














MPEB performance




Regulatory Process











Accountability



Crisis unplugged







Electricity Reforms



use of electricity





State Government












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26













MPEB performance




Regulatory Process











Accountability



Crisis unplugged







Electricity Reforms



use of electricity





State Government












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26

Regulatory Process











Accountability



Crisis unplugged







Electricity Reforms



use of electricity





State Government












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26






Accountability



Crisis unplugged







Electricity Reforms



use of electricity





State Government












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26

Crisis unplugged







Electricity Reforms



use of electricity





State Government












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26



Electricity Reforms



use of electricity





State Government












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26





State Government












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26












challenges




Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26

Conclusion



bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26

bull Thank you

Case study

Summary of the case

Slide 3

Slide 4


Slide 6

Question


INTRODUCTION


Slide 11

MPEB performance

Regulatory Process

Slide 14

Slide 15

Crisis unplugged


Electricity Reforms

Slide 19


Slide 21


Slide 23

challenges

Conclusion

Slide 26

case study let there be light

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