June 2009

Technology to Enable Power Sector Reforms: An Indian Perspective

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Technology to Enable Power Sector Reforms: An Indian Perspective

BACKGROUND 

With a demand supply gap of 66 billion units (~10%)1 and peak shortage of 16,000 MW (~15%), it is estimated that India needs to add nearly 80,000 MW of generation capacity by year 2012 (to the existing 140,000 MW1 in 2007-08). This is estimated to entail investments to the tune of $ 258 billion in the power sector– which will call for private sector participation. However, in   absence of reforms in the power distribution and retail segment, private sector investment in generation segment continues to be inadequate in spite of   privatization. The root cause of this is high level of energy losses, currently Aggregate Technical and Commercial (AT&C) losses are ~ 35% (2005-06), the power sector is not fi nancially viable in its current state. To make the power  sector fi nancially viable and self-sustaining, the government has initiated reforms in power distribution around two broad themes: (i) privatizing the stateowned distribution utilities, and (ii) funding IT-enabled loss measurement and reduction initiatives at utilities that continue to be state-owned.

ACCENTURE’S EXPERIENCE AND POINT OF VIEW

We at Accenture believe that a right balance of private-public partnership is necessary for these initial reforms to sustain, spread and transform the complete landscape of power sector  in India. Neither government’s funding nor private sector management in isolation can  deliver the kind of fi llip needed, but together they form a winning combination. Our point of  view is based on our vast experience in working with a few hundred power utilities world over  for the past several years, including utilities in India over the past decade, wherein we have  worked extensively with several private sector utilities as well as multiple State Electricity  Boards in India. Accenture (ASPL, India) is empanelled by Power Finance Corporation as the  IT Consultant as well as Systems Integrator under Government’s R-APDRP scheme.

“In absence of reforms in the power distribution & retail segment, private sector investment in generation segment continues to be inadequate in spite of privatization”

USE OF INFORMATION & COMMUNICATION TECHNOLOGY IN POWER DISTRIBUTION

Power distribution consists of 2 broad areas – (i) core distribution, and (ii) retail operation. In core distribution, IT-enabled tools can improve effi ciency in several areas such as SCADA and Load Dispatch, Demand Side Management, GIS enabled tracking of network assets and consumer premises, etc. We will focus on the area of retail operations where Information and  Communication Technology is bringing about a quiet revolution, especially in the fi eld of (i)  reducing commercial losses, (ii) improving customer service, and (iii) business turnaround of  power distribution utilities. Accenture has been partnering with key power distributors in  India by facilitating this revolution through reinventing the three pillars of utility’s business strategy, business process design and people (employee workforce and organisation structure) management.
Strategy: The advent of smart meters, automated (not the same as “remote”) meter reading,  energy audit software and related IT enablers has made it possible for Utilities to    scientifi cally measure their T&D losses, which, combined with automated computation of their collection losses, enables computation of AT&C loss in a timely and accurate manner at a geographically granular level. This shifts the entire paradigm of running the distribution business from just operating the network and supplying energy to include minimizing AT&C losses and recovering the energy supplied. While the private sector utilities have an obvious incentive to minimize losses as losses hurt their shareholder value, the government has also structured its fi nancial incentives (assured return on equity to private utilities and conversion of R-APDRP loans to grants to state-owned utilities) on accurate loss measurement and sustained loss reduction by the utilities.
Process: The installation of advanced billing and customer care software enables design of   extremely robust business processes in the fi eld of metering, billing, payment / collection & recovery, and theft control measures like analytics of metering data and consumption / payment patterns, legal and enforcement action management, etc. Thus, the utilities are able to not only reduce meter-reading errors and ensure billing accuracy, but also provide effi cient customer service and prevent revenue leakage.

Once it is recognized that the basis of process design has to be loss minimization and customer  service excellence, all business processes are designed around ensuring these aspects, such as  automated meter reading. It ensures accurate recording of power consumption by avoiding  the under-stated manual readings submitted by meter-readers (in collusion with dishonest consumers); here, it is pertinent to note that “automated” reading includes not only remote meter reading, but also, optical download of reading from electronic meter into a handheld meter-reading instrument operated by meterreader at the consumer premises. Similarly, customer care software enables prompt and effi cient on-fi eld service to all types of consumer  requests / complaints based  on urgency & priority, including innovative doorstep services and web-enabled online services so that consumers have to no longer visit the utility offi ce to apply for new connection or to pay their bills; at the same time, it gives powerful tools to utilities to undertake far more effective dunning and recovery procedures against defaulting
consumers.
People: Loss measurement by each zone / sub-zone enables fi xing of accountability to specifi c  departments / offi ces and down to individual employees. Broadening the organisation’s    objective from just AT&C loss reduction to include improvement in customer service level, employee engagement, and incorporating the (implicit / explicit) expectations of the identifi ed internal and external stakeholders (eg, safety, environment and regulatory compliance, positive relations with Govt and local community, etc), Accenture has developed a comprehensive Balanced Scorecard customized to Indian power distribution utilities. Once this scorecard is accepted by the utility as the basis of its people management, the entire  organisation structure is designed to deliver on these objectives.

IT systems enable timely, accurate and effi cient measurement of these KPIs across the entire  enterprise (across functions, geography and hierarchy), cascading down to individual employees. This lays the foundation for setting up robust performance management systems  culminating in extremely effective, self-fi nancing (and handsome!) variable reward payout  to the high-performing employees. The goal alignment between employees and organization  that results from these IT enablers nips in the bud a lot of problems that emanate from the  mediocrity and corruptibility of a demotivated workforce. Here, it is also important to realize that the western paradigm of manpower cost reduction should not be taken as a high priority for Indian utilities.

CONCLUSION

Thus, ICT is now helping shape the power distribution reforms in India. It has immense potential of positively touching an important aspect of our life, infrastructure and economy, i.e. electricity, provided we customize our strategy for the Indian realities.\\

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