Challenges in Distribution 19th India Power Forum Changing Role of Power Sector in Achieving Higher GDP Growth 23rd November 2016 Challenges in Distribution Gopal Saxena Director- BSES Discoms, Delhi

Discussion points Financial Turnaround & Regulatory Role UDAY – Present Status Loss reduction & Network Upgradation Integrating Renewable in Distribution Systems

a) Financial Turnaround & Regulatory Role… Regulated Business Fixed RoE Margin pressure Difficult to raise funds Poor balance sheet Unpredictable revenue Requirement Budgetary Discipline Increased private participation Reasonable ‘actual’ Returns Low Cost Debt instruments Dedicated Common Distribution Infrastructure Fund Financial Losses Rs 63,355 Crs (annual) Rs 4,00,000 Crs (cuml.) Negative Net worth Rs 1,16,845 Crs Total Loan Outstanding Rs 6,73,057 Crs FRP Schemes Outlay/ Disbursement [Rs Crs] UDAY : 25,880 IPDS :32,612 RAPDRP : 51,577 NEF (int subsidy) : 8,466 DDUGJY : 44,033 FRP (Yr 2012) : 56,908 RGGVY :43,882 Distribution, still financially unviable business in many states... *PFC report for FY15 3

a) Financial Turnaround & Regulatory Role… Inaccessibility … ~300 million people w/o electricity (22% of India) Unavailability … 11 % Peak Shortage (Incl breakdowns / outages/network constraints etc) Un-affordability ... SEBs surviving on Govt aid / Subsidy Overcoming Challenges: Discrimination – Private Vs SEBs Strong disconnect – SERC Vs CERC & Intra SERC Uneven reforms trajectory for different States. Financial Mess Non Cost Reflective Tariffs No ‘Cost to Serve’ model – skewed tariffs “RA” creation with no firm amortization plan. Overlooking/denying/deferring ATE Judgments. Cross-subsidy continues to increase Regulatory OBJECTIVES: Steer Competition Bring Accountability & Transparency Ensure Commercial Viability Drive Accessibility of power Quality & Affordability Elevate Renewable Energy Minimise micromanagement of the Discom’s ARRs ; & work towards bringing Sectoral Efficiency 4

b) UDAY Update.... (FY17- Oct’16) 16 States have Signed for UDAY Tariff Order issued by respective SERCs...............................13/16 States. Lowered ACS Vs Avg Realisation Cost gap ……………………........8/16 States AT&C Loss reduction………………………………………………..........  13/16 States. % Compliance / Commitment Level as of FY17(H1) for UDAY 30-45% : Haryana, Gujarat, Bihar, Punjab and Rajasthan 15% -30% : Uttar Pradesh, Bihar, Jharkhand 15% & less : Jammu & Kashmir Tariff Order Comparison (UDAY Vs Actual) S# State Tariff Increase as per UDAY Actual Tariff Hike in FY17 Delta 1 Bihar 10.00% 0.00% -10% 2 Punjab 5.00% -0.69% -6% 3 Andhra Pradesh 3.60% 0.63% -3% 4 Uttar Pradesh 5.75% 4% -2% Highest loss making states with least / Nil tariff hikes Falling “Actual Tariff Hikes” as envisaged adding to discom’s financial plight Sector showing signs of revival ?

c) Loss Reduction & Network Upgradation Source State Energy Input AT&C Last Tariff Order BU % PFC Maharashtra 106 12% 19.80% Yr 2016 Tamil Nadu 85 9% 24.80% Yr 2014 Uttar Pradesh 81 33.80% Gujarat 71 8% 16.10% Rajasthan 63 7% 29.30% Yr 2015 Karnataka 57 6% 18.70% Top 6 States 466 51% 19.50%   All India 910 100% 24.60%  138 CEA All India Electricity 1,048 Delta Generation FY 15 (BU) (PFC Vs CEA) 13% POINTS TO PONDER Huge unaccounted Energy gap from Gencos & Discoms level 13% @138 BU (Rs ~60K Crs) For 60K crs accounted : top 6 State Contribute 51% Brining down losses of top 6 states to @15% level, required additional billing 21 BU /~ 9,500 Crs. Are Current Losses the “Actual” Losses ? 51% Before The Electricity Act 2003, few key privatisations done, namely : Delhi (Only successful PPP Model) / Orissa (First PPP Model but unsuccessful) Post enactment of the Electricity Act 2003, no Privatisation has taken place Franchisee arrangements marred with High benchmark pricing, lobbying of the non-core players & capable of being implemented in small scale Future Of Distribution is PPP Model built on transparency /good governance ....current model is riddled with disputes (Financial/Operational/Legal/Regulatory)

c) Loss Reduction & Network Upgradation I N N O V A T I O N LT HT - HVDS # SMART GRID # # Solar Rooftop# ONLY Revenue Generation Source of the entire Power Chain Legacy assets with hardly any innovation Last mile with least innovation Regulated Business / Lack of cost reflective price across states Legacy infrastructure needs to be upgraded urgently Capacity building @ HR level Raising the per capita power consumption (from ~1,000kWh – 2,000kWH by 2024)G-T-D Investment Requirement Rs 30 Lac Crs; Matching Distribution Investment: 8 Lac Crs * Conventional Network Costing @ At Rs 10 Cr / MW (5 Cr Generation capacity, 3 Cr transmission, and 3 Cr distribution CapEx - smart meters, etc.) Solar generation @ Rs 6-8 Cr /MW AMRUT : Atal Mission for Rejuvenation & Urban Transformation

Harnessing marginal of the market potential… d) Integrating Renewable in Distribution Systems Renewable Energy … Source : MNRE; Small Hydro Wind Power Bio Power Solar Power Total Capacity (MW) 4,323 28,083 4,997 8,513 45,917 Installed Capacity - Solar, Wind, Small Hydro, Biomass etc. As on Oct’16 POTENTIAL Solar Roof Top (GW) Wind (GW) Harnessing marginal of the market potential…

Integrating Renewable.... Solar & Wind power projects with innovative designs for minimum land utilisation. Upcoming Smart Cities to be powered by Green Energy Sunshine Sector Rooftop solar panels Solar panels covering canals Hybrid farms : both solar & wind plants RE plant near pithead plants to reduce transmission cost Solar Powered Agri Pumps On The RADAR

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