jammui franchisee experience

7/29/2019 Jammui Franchisee Experience

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1

National Training Programme For RuralElectricity Distribution Franchisee

10-12 October ,2011

Venue: JKPDD , JAMMU


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Experience from franchising

models

2

Er. A.K.BHAGAT

REC, New Delhi

National Trining Programme for Franchisees


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3

FanhseUbn&Ra


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Case Studiesbased on evaluation study conducted

by REC and other organizations

Uttar Pradesh

Karnataka

Bihar

Assam


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Uttar Pradesh

Revenue FranchiseeCollection based

Experience from franchising models


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Duties and responsibilities Meter reading, distribution of electricity bills and collection of

revenue from the consumers, attending fuse off calls and checking ofpower theft

Compensation structure

Upto 60% revenue collection : 10%61% to 70% revenue collection: 10% + 1%additional71% to 80% revenue collection: 11% + additional 1.5 %81% to 90% revenue collection: 12.5% + additional 2 %

91% and above revenue collection: 15%No commission applicable if collection less than 60%;For past arrears- 7% commissionIncentives for new connection, reconnection/disconnectionPenalty clause for default in meter reading

Revenue franchisee -UPExperience from franchising models


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Revenue franchisee -UP

Compensation structure

Additional Incentive

Regularisation of per unauthorised Domestic Service

connection-Rs100/- Regularisation of per unauthorised Small HP(SP) Service

connection-Rs300/-

Conversion of per DS to CS if DS consumer using power

for commercial use Rs.40/-

Regularisation of increase of load per BHP per Agconnection Rs.40/-per BHP


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Experience - Bulandshahr

Better consumer awareness 60-70% of the respondents are aware

Increase in revenue

Kakor substation: Rs 36.41 lakhs to 78 lakhs from July to December06

Increase in number of consumers

Reported reduction in unauthorized connection; converted to regular

connection through motivation/consumer camps

Reduction in consumer grievances

Timely bill delivery;

Prompt service (fuse off call and service complaints) Impact on socio economic development

New business opportunities and employment generation



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Impact on revenue

0

5

1015

20

25

30

35

40

45

Amount in Rs lakh

July August September October November December

Month

Assessment 2005 Assessment 2006 Realisation 2005 Realisation 2006

Domestic consumers willing to install meters; want franchisees/

utility staff to explain the tariff and bill estimation based on meter

reading .The increase realisation in Dec.,06 is of past arrears



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10

Increase in consumers

0

2500

5000

No of

connection

Domestic Agriculture

Category

Jul-06 Dec-06

Kakor



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Limitations Contract design

No two-way exit clause built in the agreement

Capacity building of franchisees

No formal training on meter reading, revenue

collection, bookkeeping and technical aspects

No prior experience in working in the electricity sector

or in public utility sector



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Uttar PradeshInput based Franchisee



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Government of UP- Objective Develop Input Based Rural Franchisee for decentralized electricity

distribution and management

Franchisees can be individuals, firms, users associations, co-operative

societies, non-governmental organizations or PRIsInput based franchiseeReduction in technical & distribution losses

Improvement in metering, billing and collection

Better and reliable services to the rural consumers Improved mechanism for collection of arrears

Facilitate household electrification in rural areas



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Basis of area selection

A scale of 5 devised and adopted for grading the sub stations meeting thepreliminary criteria on the basis of five parameters mentioned below:

Number of villages coming under RGGVY - Substations havingmaximum number of villages falling under RGGVY assigned five pointsand the substations having least number of villages under RGGVY given

one point. Connected Load - The substation with maximum connected load given

five points and one with least connected load given one point Revenue assessed - Maximum revenue potential given a score of five and

the minimum as one point Collection efficiency - Substation having least collection efficiency

assigned 5 points while those having highest collection efficiency assigned 1point Number of consumers - Substations having maximum number of

consumers given five points and the least as one point

Source: Feedback Ventures and UPPCL



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Need assessment of pilot area

Objectives To Assess

Need Assessment of the area under33/11 KV Substation

Electrificationstatus of the areaserved under S/S

Availability ofinfrastructure -

roads, telephone,etc

Existing PRIs,SHGs, local

entrepreneursand their history

Existing system &hindrances, cost

structure of thelicensee, demand mix




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16

Score Sheet


S.No.No of

Consumers

Connected

Load (KW)

Revenue

Assessment (Rs)

Total No. ofRGGVY

Villages

Total Score

(Max 25 pts)

Dalpatpur 7818 2921 902114.00 47 19

Agwanpur 6159 2395 1234102.00 3 17

Thakurdwara 6305 2345 832315.00 9 16

Bilari 7181 2212 837015.00 1 16Surjan Nagar 5643 2100 765501.00 11 15

Kundarki 3297 1840 571723.00 7 10



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Karnataka

Revenue FranchiseeCollection based(GVPs)



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GVPAn Innovative Scheme

GVP means Grama Vidyut Prathinidhi

Renamed as Micro Feeder Franchisee

(MFF) selected to carry out the various

activities related to supply of Electricity in

Grama Panchayat (GP) areas especially to

improve rural revenue collection.



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Franchisee system -Karnataka

Initiated in 2002-03 to improve service and revenue fromrural areas;

Duties and responsibilitiesMeter reading, billing,

collection and other minor maintenance works



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Should be a Resident of the Panchayat

Should be of Age Between 18-38 years

Minimum Educational Qualification

ITI or Engineering Diploma in any branch or

SSLC / PUC with knowledge of billing and collection.

He should provide a Bank Guarantee for Rs.75,000 or

less subject to15 days Revenue Billing for the month.

They will be selected by a committee through oral tests.

An identity card will be given to GVP by the utility.

Eligibility Criteria - GVPExperience from franchising models


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Meter Reading, Billing, Bills Distribution and Revenue

Collection

Depositing the Collections with the Utility

Registering Complaints and attending them with staff ofUtility

Facilitating the utility in attending the Grievances of Low

Tension Consumers Viz. Domestic, , Commercial, Small

and Medium Industries upto 40 H.P. (Excluding Water

Supply, HT, Streetlight)

Giving Feed Back about Field Realities to the Utility

periodically

Role and Responsibilities of GVPs



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An MOU is to be signed by GVP with theBESCOM.

A monthly fee of 8% on revenue collection (Up to

base target fixed) subject to a maximum of Rs.4000/- per month.

100/- per installation for regularizing the

unauthorized connections.Penalty for under performance

Penalty at 2% for every short fall of Rs. 10,000/-

below base line every month.

Incentive Fee Payable to GVPsExperience from franchising models


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Role of Gram Panchayats

Assisting in selection of GVP

Introduce and Support GVP Initially

Observe Performance of GVP on Day To Day Basis

Closely and Regularly

To Give Feed Back to the Utility

To Assist GVP During Crisis

To Assist in Discharge of GVPs ) Regular Functions



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Rural Customers Paying Their Bill Staying at

Home

Saves Time and Travel Expenses for the

Consumers.

Consumers will have One Familiar and Local

Person as a Representative to Approach.

Consumers Complaints are Addressed Locally.

GVP is at the Disposal of GPs during System

Breakdown or any Emergency Situation.

How A Rural Customer Wins !Experience from franchising models


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Better Understanding of Consumers Problemthrough the Involvement of GPs and GVPs.

Reaching Out to More number of Consumers.

Quick Feedback of Real Situation by the GVPs toAct Upon.

Revenue Collection will be Increased by BetterRelations and Understanding Between RuralCustomers & BESCOM.

Improvement of Image

How BESCOM Wins !



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Percentage Increase in Collection

118

122124

129

135

10 5

110

115

12 0

12 5

13 0

13 5

14 0

May-06 Jun-06 Jul-06 Aug-06 Sep-06

Month

Percentageincrease



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Benefits of GVPs -Bijapur

Increase in billing and collection efficiency - 12-15%

Increase in number of consumers

Domestic and IP set connections: 20-22% in past 5 years

Increase in revenue collection - 15-35%

Increase in base collection - Rs 2.47 lakhs in April 2004 to Rs 7.05

lakhs in Jan 2007

Average income per month varies between Rs 2000 and Rs 4000



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Limitations of GVPs Bijapur & Gulbarga Non accounting of system losses

Selection criteria for GVPs - lack of qualified people

An individual vs agency

Lack of data documentation

for collection efficiency, feeder-wise improvements, etc.

Delay in payments by the utility

Insufficient remuneration; average income of Rs 1500



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KarnatakaRevenue Franchisee- Input based



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Benefits of IBFsUttar Kannada Reduction in line losses

Increase in billing and collection efficiency - 5-10%

Improved revenue collection Sirsi - Rs 0.9 per kWh in 2004 to Rs 1.40 per kWh in 2006

Karwar - Rs 1.7 per kWh to Rs 2.1 per kWh

Regular billing- 98% meter reading and billing Increase in employment and income generation

Varies between Rs10,000- Rs15,000 per month managing 2-3 feeders



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IBF Performance 06-7

1.91 1.91

2.11 2.1

1.91

1.09

2.13

1.54

0.73 0.71 0.75 0.73 0.75 0.73 0.75 0.75

1.07 1.03

1.35

0.93

1.36

0.26

0.62

1.911.91 1.91

1.86

1.54

1.911.83

1.83

-0.11

-0.5

0

0.5

1

1.5

2

2.5

Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06

Month

Rs.

in

crores

Baseline Collection Rs. In crores Actual Collection Rs. In crores

Baseline Loss Rs. In crores Actual Loss Rs. In crores

IBF performanceExperience from franchising models


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Development of Franchisee in BSEBExperience from franchising models

Source: Bihar State Electricity Board


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Remuneration of Franchisee in BSEBExperience from franchising models



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Incentives

A sum of Rs.50.00 toRs.75.00 is to be paid for every newservice connection

Additional Incentive for installing new service

connection in large numbers Incentive of 15% against collection of arrear amount.




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Penalty

The performance of the Franchisee is to be reviewed every threemonths

In case of the Franchisee failing to collect the average minimummonthly collection target i.e. 35% of monthly target, a penalty of2% of the average shortfall assessed for every three months is to

be imposed If the Franchisee fails to deposit the amount collected from the

consumers by 5th of the following month, a simple interest of 2%per month for the delayed period is to be charged.

If the Franchisee fails to deposit the amount collected from theconsumers within stipulated period for 3 (three) consecutivemonths or does not achieve the minimum collection target of35% for 3 consecutive months, the agreement may be terminated

with forfeiting of Security Deposit after serving a 15 days Notice.




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Benefits to BSEB

Revenue collection in respect of 11 KV FranchisedFeeders has increased considerably and in some casemanifold (~ 251%).

Theft of conductor of HT & LT lines in franchised areashave drastically reduced.

Employment of rural youths Increase in service connections Due to vigilant eyes of franchisees in their areas,

quantum of theft of energy has reduced drastically




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Assam

Input Based Franchisee



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Franchise system in Assam

Command Area of DISCOMs



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ASSAM : BASIC FACTS

Assam is the gateway to the North-East having

an area of 78,438 sq km and

a population of about 26.6 million.

divided into 28 districts

comprising of 87 towns and 25,124 villages.

Rural population being 87 percent.

About 63% of its population is engaged in agriculture and allied

activities, of which tea plantation is the most important.



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Assam: Franchise System (SPSS) Type

Input based Franchisee at the DT level - Single Point Power Supply System

3 phase static meter is installed at the LT end of DT

Franchisees receive electricity in bulk at the LT end; makes payment toDISCOM based on energy charge and fixed charge.

Selection

Franchise system initiated on a pilot scale in Assam in 2003; Advertisement

published in newspapers offering DTs in the state; Scheme is for rural consumers only; 80% of the connected load to be

domestic and DTs upto a maximum of 250 kVA are handed over tofranchisees

Selected based on first come first served basis; Duration - 2 years;

Security depositbased on 2 months assessed consumption; load securityreviewed every 3 months.

Agreement could be terminated with 2 month notice from either side

Duties and responsibilities

Meter reading, preparation and distribution of electricity bills, collection of

revenue, LT line maintenance and checking of power theft


E i f f hi i d l


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Energy meter installed at DTR


E i f f hi i d l


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Franchisee office



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DT handed over to the franchisees

June 07

22

717

2203

20301787

15912003

June 06

April 07

January 08

March 08


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Consumers under franchisees

793

29915

111114

105538

87897

820252003

June 06

April 07

June 07

January 08

March 08


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No. of Franchisees

1

226

658658

561

4882003

June 06

April 07

June 07

January 08 March 08



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Commission: 15% of the DT meter bill; Allowable LT line loss10% of the energy supplied; LT line maintenance cost allowance = 2 % of the DT meter bill. Rebate @3 % of net amount payable to DISCOM subject to

full payment within due date. Cash incentive of Rs 100/- per new consumer processed

through the franchisee. Franchisees are paid interest @ 5% on the security deposit as

per AERC tariff order

Energy Charge = @ Rs. 2.55/ kWh Fixed charge = @ Rs 30.00/kW of connected load

Incentive structure -SPSS




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Franchisee billing -SPSSTotal connected Load of domestic consumers kW A

Total energy supplied to the franchisee area kWh X

Less 10% distribution loss kWh 0.1 X

Energy available for sale kWh 0.9 X

Energy billed for non-domestic consumers by agency kWh Y

Energy consumed by domestic consumers kWh Z=(0.9X-Y)

Energy bill amount for domestic consumption Rs B=Fcd*A+Z*EcdEnergy bill served for consumption for other categories Rs C

Total bill amount served by DISCOM to franchisee Rs D = B+C

Meter rent payable by franchisee to DISCOM Rs F

Profit margin allowed to franchisee incl. of LT linemaintainance

Rs 15% of D + 2%

Amount payable by agency to DISCOM excluding meter rent Rs E = 85% of D

Net amount payable to DISCOM by franchisee Rs E+F

Fcd - Fixed charge for domestic category Rs/ kW 30

Ecd - Energy charge for domestic category Rs 2.55

p g


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Basis of Tariff Determination for SPSS AgentsAnalysis of Consumer Mix for April 06 June 06

Jeevan Dhara 8%

Domestic A 92%

Assumption of a Sample Case under SPPS

DTR Capacity = 100 kVA

Total Consumers (JD & Dom-A) = 100

Jeevan Dhara = 8

Domestic A = 92

Assumed Consumption per month for JD = 29 units

Assumed Consumption per month for Dom-A = 60 units

Total units billed by Agent = (8*29 + 92*60) = 232 + 5520 = 5752 units

Amount billed to Consumers = (232*2.15 + 5520*2.80) = Rs 15,955/-

Distribution Loss allowed to Agent = 10%

If the loss is higher say = 15%

Units recorded by DTR meter = 5752/(1-15%) = 6766 units

Total units billed to Agent = 6766 * (1-10%) = 6090 units

If Tariff is Rs 2.60 per unit, then Amount billed to Agent = 6090*2.60

= Rs 15,834/-

Energy

ChargeRs/kW

h

Fixed

Charge(Rs/kW

/month

)

Jeevan Dhara

(up to 0.5 kW

and 1 unitper day)

2.15 15

Domestic A

(up to 5 kW)Up to 120

units per

month

2.80 30

Next 120units per

month

3.85 30

Balance

units4.55 30

Prevailing tariff


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Commercial Terms

Contract period of two years.

Negotiations for extension to start six months prior to the expiry.

Franchisee to deposit security amounting to 2 months assessed

Consumption.

Monthly joint meter reading of the franchisee meter.Franchisee to get rebate of 3% if monthly bill is paid in full within due

date.

Delayed payment surcharge of 1.5 % per month.

On non-payment ASEB may terminate contract with 7 days notice.

If franchisee fails to fulfil its obligation, ASEB may resort to buy back.

Agreement may be terminated with two-month notice from either side.



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Employment generation -SPSS

Name ofDiscom

Number ofFranchisee (Sep 06)

No. of personsemployed (Sept 06)

LAEDCL 71 548

UAEDCL 118 564

CAEDCL 118 349

Total 307 1461

Source: Assam State Electricity Board




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Improvement in collection

Check on unauthorized connections, regularization afterdisconnection

Reduced overheads of ASEB

Other Impacts

-single-point-contact,-consumer satisfaction due to

prompt service,

-employment generation

among local youth,

-preventive maintenance of

network

Positive Impact of SPPS on revenue realization

15139

1850

27833.6

31525.29

0

5000

10000

15000

20000

25000

30000

35000

Billing Collection

Billing

&C

ollection

in

Rs.

Before SPPS Af ter SPPS

SPSS - Benefits

Consumer Survey Domestic


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Consumer Survey - Domestic

90%

67%

57%

90%

90%

90%

90%

81%

81%

76%

67%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Metered Consumers

Meter running OK

Tariff Sensitivity

Ease of New Service Connection

Meter Read on Schedule

Timely Monthly Bills

Billing Complaints addressed on time

Fuse Call complaints

Satisfied with service quality

Steps to prevent theft

Quality of service improved


Consumer Survey Non domestic


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Consumer Survey Non domestic

89%

100%

22%

100%

89%

100%

89%

100%

89%

89%

78%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Metered Consumers

Meter running OK

Tariff Sensitivity

Ease of New Service Connection

Meter Read on Schedule

Timely Monthly Bills

Billing Complaints addressed on time

Fuse Call complaints

Satisfied w ith service quality

Steps to prevent theft

Quality of service improved




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Experience - Nagaon district Better consumer awareness

Majority of the respondents are aware Increase in revenue

Revenue increased by 95% (from Rs 4.99 lakh to Rs 9.76 lakh) for 113 DTs

managed by franchisee during the period May 2005 to Dec 2006.

Percentage of billing in franchised area is almost 100% against 96% (average)

for the district Collection efficiency in franchised area is 93% against 53% (average) for the

district

ARR for Nagaon district considering all categories of consumers (urban,

rural, industrial etc) is Rs 2.6/kWh whereas ARR in franchised area is Rs

2.4/kWh for rural consumers only. Increase in number of consumers

16% increase of consumers in the franchised area

Reported reduction in unauthorized connection




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Experience - Nagaon district

Reduction in consumer grievances Timely bill delivery; Reduction in defective meters 90% of respondents reported better and prompt service by

franchisees (fuse off call, service complaints, line maintenance etc)

Impact on socio economic development New business opportunities and employment generation for village

youths

Average staff per franchisee is 4 and staff per DT is 1-2 persons

4 of the surveyed 13 franchisees have installed computers for ease of

operation Average commission income is Rs 2600 per DT. For 510 DTs,

commission income is Rs 10000Rs 26000

Average cost towards room rent, staff salary etc ranges between Rs

1000 to Rs 12000 per month.




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LimitationsNagaon district Financial sustainability

Survey indicates franchising of only 1-3 DTs ( in few cases) with commission as

low as Rs 300 making the venture unsustainable

In some cases, franchisees have been allotted DTs in different locations under

different feeders, increasing their overhead costs

Capacity building 80% of the surveyed franchisee reported that no formal training on meter reading,

revenue collection, bookkeeping and technical aspects was provided

No training to DISCOM officials on commercial aspects of franchise system

Technical

Average distribution loss of the surveyed franchisees is 18% against allowable lossof 10%

High loss because of haphazard growth of load over the years, long LT line length

( 3 km to as high as 6 km), unbalanced load on the network, current flow in the

neutral wire

Franchising in power sector


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Common causes of friction

TransparencyTraining and Support

Revenue Sharing

Service DeliveryInadequate support from franchisor

Verbal understandings which are not written into the

formal agreement

Source: Franchise India Holdings Ltd, New Delhi and First Franchising Pvt Ltd, New Delhi




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Mentalityboth franchisors as well as franchisees Several wrong precedents of franchisors as well as

franchisees

To an extent:

many franchisees commitment to service quality is missing

many franchisors commitment to provide the promised

support to their franchisees is in doubt

Resultatense

relationship, which doesnt help anyone

Key ConcernsFranchising in power sector



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Key Concerns

Financing for franchisees is a problem area with financialinstitutions

soft expenses not recognized as part of project cost bymany institutions

Legal & disclosure framework for franchisees is not in place

increases chances of fraud by fly-by-night franchisors

makes it difficult to resolve disputes

Electricity sector not remunerative with high AT&C losses make Franchising unviable for start-up entrepreneurs




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Robust selection procedure

Ensure competency and transparency

Technical and financial strengths, active interest, long term

business goal and capacity to learn

Contract design

Clearly defined scope of work and roles and responsibilities

Clause on initial and ongoing obligation of franchisers

An appropriately defined partnership to avoid any possible

conflict

Critical factors for successbased on

evaluation conducted in five states

p g



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Develop the model into a blend of commercial andentrepreneurial approach to electricity distribution

Infrastructure assessment Franchisee should be given defined time frame for assessment

of distribution network proposed to be undertaken Utility should provide all details as per contract within a time

frame

Capacity building

Of franchisee on the technical, commercial, financial, socialand managerial aspects Ongoing consumer awareness, capacity building of utility

officials at different levels Discussion forums for experience sharing and complaint

redressal involving stakeholders on a regular basis

p g



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A strong team for franchise development

SE OPERATION

X.En I X.En IIIX.En II

5-6 memberteam

headed by SE

At the circle level

The team should be given with set goals and duration toachieve the targets

Term appointment of minimum of 2 years to ensure stabilityand better coordination

p g


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MAHAVITARAN

MaharashtraState Electricity

Board

BHIWANDI A MODEL PROGRESS


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BHIWANDIA MODEL PROGRESS

Salient features:

-- October 2006 : Agreement signed between

Torrent Power AEC Ltd ( now TPL) and

Mahavitaran.

-- TPL currently distributes power to 1,60,000

consumers in BHIWANDI town ofMaharashtra.

-- The franchise contract is valid for 10 years.

-- Mahavitaran recieves Rs.1.8 billion per year

as revenue.

-- TPL to reduce distribution losses to 14%from 44% and improve collection efficiency to 93%.

-- TPL expects to add 1520 billion to the

revenue from the Bhiwandi township over the 10 year

period.

K chi m nt f th di trib ti n fr nchi TPL


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Key achievements of the distribution franchiseeTPL.

Distribution losses has come down by 810% from

the earlier level of 44%.Transformer failure rate reduced to 20% from 40%.

94,000 meters (70% of the total meters) replaced inthe township.

29 new 22kv feeders added to the existing 46 feeders.4 switching stations revamped by replacing breakers,relays, conductors and isolators.

More than 90 Mvar capacitors installed to improve

power factors.Revamping of 2200 DTRs, including of repacementsof 1000 DTRs, thus adding 100 MVA to DTRcapacity.


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LT network for 420 DTRs have beenrevamped and supply made underground.

Billing efficiency based on meter reading

increased to 87% from 46%.

Ujjwal Bhiwandi Abhiyan scheme to

provide power supply to small residences

with load upto 0.5 kw through simplified

procedure.

Over 26000 new connections have been

released so far.


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Increased recovery from defaultersthrough serving notices and

disconnections, and 300 vigilance casesbooked.

A 24 x 7 call center, in addition to a

customer advisory committee, and 2dedicated committed care centers.

An internal grievances redressalcommittee set up according to the guidelines of ERC, Maharashtra.

A 24 x 7 control room and faultattendance center, for faster response for

complaints. 90 % of the complaints are


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Towards the end of 2007, Mahavitaran has

awarded a second franchise to M/s.Crompton Greaves, for the civil lines,

Gandhi Bagh and Mahal areas in Nagpur

district of Maharashtra.

Plans to franchise highn loss making areas

of Mahavitaran, such as Aurangabad,

Malegaon, Ulhas nagar, and Jalgaon are

on the anvil.


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THANK YOU!

jammui franchisee experience

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