Fundamental Analysis and Impact of APDRP on Customer Satisfaction

8/2/2019 Fundamental Analysis and Impact of APDRP on Customer Satisfaction

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BINIT KUMAR DASMBA-Power Management2nd Sem [2011-2013]

UNIVERSITY OF PETROLEUM AND ENERGY STUDIES

FUNDAMENTAL ANALYSIS AND IMPACT

OF APDRP ON CUSTOMER SATISFACTION


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BINIT KUMAR DASMBA-Power Management2nd Sem [2011-2013]

FUNDAMENTAL ANALYSIS AND IMPACT

OF APDRP ON CUSTOMER SATISFACTION


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i

ACKNOWLEDGEMENT

I am highly indebted and grateful to my mentor Prof. Er. Anil Kumar, Faculty ofEconomics, University of Petroleum and Energy Studies, Dehradun for his guidance,suggestions and support through out the preparation of this report. His critical appraisal,comments and suggestions have helped me in maintaining the right direction for mystudy and making it meaningful.

I wish to thank Mr. A.L Rao, UPES and all my faculty members for co-ordinating in thedaunting task of obtaining response to Questionnaires from Customers, Consultants,Policy Makers, Govt. Authorities in India. I am also indebted to them for having gone astep further in eliciting information from all above knowledgeable sources through

personal interviews.

I would also want to put on record my gratitude and indebtedness to my parents, whohave always encouraged me for higher laurels, my elder brother, who were not only thesource of my inspiration and encouragement to pursue this course, but also managedall fronts courageously, during my long stay of seven year away from home.

Binit Kumar Das


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EXECUTIVE SUMMARY

This report was prepared for Power Trasmisssion project. This report is intended for a special

Project report. In this report first it has been described about APDRP [Accelerated Power

Development and Reforms Programme] and the various role of different Financial Institutionsand Role of NTPC and PowerGrid.

Then it has been examined the changing environment in the power distribution sector in India

and in relation to the global developments.

Literature survey

Market Analysis

Development of strategy for marketing turnkey solutions

Now it is necessary to search for answers for some questions: Have power sector reforms andprivatization improved customer satisfaction? The main objective of electricity industry is to

achieve customer satisfaction through generation of electricity of the right quality and quantityat an affordable cost and supply to the consumers efficiently whenever and wherever required.This section basically deals with

Need for a Training Policy

Lack of Emphasis on Training in Transmission & Distribution

DISCOM Technology Trajectory

Understanding customers is a very important and challenging area for any business enterprise.

Among the many challenges, the most crucial one is the islands of systems that track the

business dealings of a customer with the enterprise. Where the next section deals with

Customer Information System- CISalong with the Accentures approach to CIS

transformation

Finally conclusions on the APDRP and why did it fails and the development of its upgraded

version R-APDRP [Restructured Accelerated Power Development and Reforms Programme]


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Table of Contents

Chapter 1 Page No.

1.1 Introduction 11.2 Accelerated Development Programs 1

1.3 The Implementation of APDRP: Consultants 3

1. Role of NTPC and PowerGrid in APDRP 3

3. Role of Financial Institutions (FIs) 3

2. Resource Institutions 4

Chapter 2

2.1 Confrontation of APDRP 5

2.2 Research Objectives 8

2.3 Methodology 9

2.4 Literature Survey 9

2.5 Market Analysis 9

2.6 Strategies for Major Equipment Manufacturers 10

2.7 SWOT Analysis and TWOS Matrix 12

2.8 External / Internal Factors Assessment and Strategic Positioning 16

2.9 Conclusion 21

Recommendations

Key Issues & Concerns

Actions to be initiated


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Chapter 3

3.1 Improving Customer Satisfaction by APDRP 25

3.2 Need for a Training Policy 26

3.3 Lack of Emphasis on Training in Transmission & Distribution 263.4 DISCOM Technology Trajectory (DTT) 26

Step 1: A System for Curtailing AT&C LossesStep 2: A System for Achieving Operational Efficiency and Customer

Service Excellence

Step 3: A System towards Evolution of Smart Grid

Chapter 4

4.1 Customer information systemCIS 37

4.2 Transforming your customer information system brings risks-

and rewards 37

4.3 Accentures approach to CIS transformation 38

Large electric utility reduces cost to serve 39

What went wrong with APDRP? 40

Restructured Accelerated Power Development and Reforms Program 41

Positives for RAPDRP 42

Eligibility criteria for R-APDRP assistance 44

Will R-APDRP fail? 45

Conclusion 46

References 47

Bibliography 48


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1.1 Introduction

The Power Sector in the country has grown manifold since independence. There is acontinuous gap between the supply and demand, besides peaking shortage almost all times in ayear. Despite of growth of sub-transmission and distribution sector, it could not match the

investments in capacity addition. A section of our population is yet to see the electricity intheir homes. In the monopolistic set up with state control, customer satisfaction is neglectedand realization of revenue is not given due importance. There is a need to focus on commercialapproach in the power sector to encourage investments in this vital infrastructure addition.Government of India has taken into cognizance the need for commensurate improvements inthe electricity distribution and committed itself to supplement the efforts of the State utilitiesand have ongoing Accelerated Power Development and Reform Program (APDRP) to provideinvestment assistance to bring about overall improvement in utilities along with incentives toturn around the utilities. The focus of the reforms has been to look at the distribution sector inthe holistic manner and improve the performance in all business areas with introduction ofInformation Technology (IT) in this vital business chain.

1.2 Accelerated Development Programs

Power is the most critical element in the economic growth. The economic growth greatlydepends on a commercially viable power sector that is able to attract fresh investments.However, the financial condition of the State Electricity Boards (SEB) had become a matter ofconcern considering that their aggregate losses had reached `26,000 crore during 2000-2001which was equivalent to about 1.5% of GDP. To bring the losses and make the distributionsector commercially viable, Accelerated Power Development Program (APDP) was launchedin 2000 2001 as a last means. Slowly, government realized that there is an urgent need not onlyfor the development of the distribution sector, but complete reforms of the existing

infrastructure. This led to the birth of Accelerated Power Development and Reforms Program(APDRP) during 2002-2003.

The objectives of APDRP were:

Improving customer satisfaction

Reduction of AT & C losses to around 10%

Improving financial viability of State Power Utilities

Increasing reliability &quality of power supply

APDRP was an ambitious program of government of India launched as a perfect business

model.The thought was nice, as a distribution circle was identified as a Strategic Business Unit

(SBU), where Superintending Engineer (SE) of the concerned circle was renamed as Chief

Executive Officer, and Junior Engineer (JE) as the Feeder Manager. CEO was made

accountable for implementation of the scheme from the start of framing of DPR to execution

of the scheme; he has to enter MoU with the concerned DISCOMs. MD in turn has to enter

MoU with MoP, GoI that the targets as prescribed in the DPR would be achieved in the time


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bound manner as specified. The CEO will not be transferred until the completion of the

scheme.

APDRP was thought as a six level intervention program to reform the distribution sector

primarily to make it viable. Efforts were put in to focus on reforms in the distribution sector to

improve accountability and revenue realization in the form of increased metering, conversion

of un-metered connections to metered connections, addition of fresh connections, higherbilling and collection efficiency. Technical, commercial, financial, IT, and organizational level

interventions were thought as part of six level intervention strategies. These interventions for

distribution reforms were to be made at the following levels:

1. National level intervention

The basic issues at national level are related to policy, legislation, uniform standards, energy

conservation, and accounting standards.

2. State level interventionThe basic issues confronting the state level interventions are formation of SERc, issuance to

regular tariff orders, providing legislative support for involving local bodies in management of

distribution business, removal of tariff anomalies, subsidies and budgetary support.

3. SEB level intervention

Increase in income

To increase the income, the billing has to be increased, pilferage has to be reduced, more

remunerative pricing of the commodity (energy) and optimum utilization of physical assets has

to be made.

Reducing the Expenditure

To reduce the expenditure, the least cost energy has to be sourced simultaneously reducing the

energy management or energy handling cost. In order to achieve the objectives of a retail

business model it was proposed to convert the circle as an independent identifiable business

unit of the DISCOM.

4. Feeder level intervention

11kV feeders are the basic source of income to an electricity utility. The issues confronting it

are metering and billing, bill collection, abnormal voltage, segregation of losses and over all

ensuring quality of power supply.

5. Consumer level intervention

The basic issues at consumer level are related to mandatory metering, compliance of billing,

consumer satisfaction, and energy conservation


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1.3 The Implementation of APDRP: Consultants

63 circles were identified for implementation of APDRP in the first phase. For the

implementation, advisor cum consultants were appointed to assist states in formulation of DPR

and oversee the implementation. During this phase advisor cum consultants also carried out

capacity-building exercises. NTPC and PowerGrid were appointed for this purpose.

1. Role of NTPC and PowerGrid in APDRP

In November 2001, Ministry of Power identified NTPC and POWERGRID as the lead Advisor

cum Consultants (AcCs) and brought CPRI and MECON under the charge of NTPC.

WAPCOS,

NPC and ERDA were brought under the charge of POWERGRID to bring in consistency of

approach amongst the AcCs. These two organizations were to directly look after the work of

28 circles and are oversee the work of other AcCs in 35 circles.

NTPC and PowerGrids responsibility for new schemes were as follows:

Advise and help SEBs/utilities in preparation of DPRs and wherever requested

specifically by utility, they shall prepare DPR for States as consultant

Assist SEBs/utilities in prioritization of schemes for urban areas in distribution circles

and ranking of projects for improvement in revenue collection and increase in customer

satisfaction

Assist Monitoring Committee for review of techno economic appraisal of the DPR

prepared by utilities

Assist MOP in prioritization of available funds to be allocated to States/Utilities under

APDRP scheme

Monitor periodically the physical and financial progress of various distribution circles

for which APDRP funds have been allocated and disbursed

Advise MOP in devising guidelines for uniformity of approach in preparation and

evaluation of project proposals, and disseminating information on best practices under

APDRP scheme

From financial year 2002-03, they would take the overall responsibility of

implementation of GOI's APDRP scheme under the guidance of MOP

2. Role of Financial Institutions (FIs)

The FIs participated in financial vetting of the schemes for ensuring their bankability. They

also reviewed the provisional and audited profit and loss accounts and balance sheets for thepurposes of release of incentive. Schemes proposed should generate confidence in the FIs that

the loss reductions claimed, as a result of investments would result in improved-metered

energy and consequently revenue inflow. 25% of the scheme cost was funded by central

Government under APDRP. The balance 75% was obtained by the SEB/DISCOM either from

financial institutions or through their internal resources. The proposed method of funding the

balance 75% was to be brought out clearly in the DPR.


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3. Resource Institutions

Assistance of third party institutions was to be sought in implementing APDRP.

Concurrent project monitoring & reporting

Verification of technical specifications

Capacity building

Quality checks during execution

Post project benefit evaluation

The resource institutions could be NTPC, POWERGRID, any educational institution of

eminence, etc.


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Chapter 2

2.1 Confrontation of APDRP

Power is a critical infrastructure for the growth of Indian Economy. Acceleration in the

economic growth will depend upon a financially and commercially viable power sector that is

able to attract fresh investments. However, the financial health of State Electricity Boards

(SEBs) has become a matter of grave concern considering that their losses have reached an

alarming level of`260 billion that is equivalent to about 1.5% of GDP in 2002-03. World

Bank estimates this loss would increase to `400 billion (7150 million Euros) in the next five

years, unless this trend is halted with corrective steps. Out of total energy generated,

approximately only 55% is billed and only 41% is realized. The gap between average revenue

realization and average cost of supply has been constantly increasing. During the year 2001-

02, the average cost of supply from State Electricity Boards (SEBs) was `3.04 per unit and the

average revenue realization was `2.12 per unit.

The major factors responsible for financial sickness of SEBs are (IEEMA Journal Sept 2002, p.

18 & 19 ) :

Skewed tariff structure leading to unsustainable cross subsidies by State Government.

Huge Transmission & Distribution (T&D) losses, largely due to outright theft and

unmetered supply. It has been estimated that theft alone causes loss of about `200

billion (3500 million Euros) annually.

Lack of accounting and accountability in distribution.

Large man power27 to 30% revenue is used for establishment charges

Outdated rules, regulations, management structure and practices

Unstable Top Management

The government has initiated the following steps in an attempt to reform the power distribution

in the country.

To bifurcate / trifurcate the State Electricity Boards (SEBs) into Generation, Transmission and

Distribution companies. This is being done to improve the accountability of people as to which

sector is showing losses despite combined efforts of the state and the State Electricity Boards

(SEBs).

1. To meter the total power at different ends and achieve 100% metering.

2. To increase the flow of funds in the distribution sector through financial institutions,

soft loans and government funding.


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3. To encourage private participation in the distribution of power as this segment is

greatly marred by politics leading to high losses.

The above reforms are going to change the concept of marketing in the distribution sector with

focus on turnkey projects. The setting up of an independent power project on a turnkey basis

wherein a contractor is given overall responsibility from concept to commissioning is 2-3

decades old. In the last 7-10 years the turnkey concept has grown in demand and the pace

set has been unprecedented. The opening of the Indian Economy and the impetus on

rapid Industrialization has further imparted importance to the concept of turnkey

projects.

Considering the importance of Turnkey projects and its rapid advancement in the present

scenario, it obviously has become important for any organization dealing in power

Transmission & Distribution equipment and turnkey projects, to have a systematic and

structured approach to all the marketing aspect of the projects, to encounter the various

challenges thrown due to rapidly changing environment. Also with the growth in investment in

Transmission & Distribution sector, the trend is likely to get a boost. Besides this, the

breakup of SEBs into distribution companies and private participation, has led to slim

organizational structure. Thus, the concept of doing it themselves is giving way to

outsourcing.

With the need of improving power distribution and power sector reforms, the trend of

Turnkey concept, which was popular in Generation and Transmission sector ( higher voltage

class), is now picking up in distribution sector (lower voltage like 33kV & 11kV). Thetransmission voltages are above 33kV and distribution voltages are up to 33kV.

The quality of regulation within the power sector is key to the investment climate. It

determines the rules for investment finance and private participation. Effective regulation

mobilizes investment finance at minimum cost and ensures good performance, the benefits of

which can be passed on to consumers. The alternative to effective regulation is sovereign

finance, but this is neither desirable from an incentive point of view, or in many cases,

practical.


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Some of the factors affecting the global power markets include:

The collapse of Enron, which resulted in electricity companies retrenching, focusing

on domestic markets and increasing equity backing to restore credit ratings

Low electricity prices in the US and UK markets, which resulted in losses for investors

The currency collapse in Argentina, which adversely affected US and European

investors, and

The failure of investments (e.g. backed by Power Purchase Agreements in Pakistan),

which raised perceptions of sector risk.

As a result of these events, US investors, and some European investors, have changed their

strategy towards transition economy power sectors. For example, the American utility AES

considered selling its interests in the Georgian Telasi Distribution Company and in its

distribution assets in Ukraine. However, the company has now decided to remain in these

countries, but has shelved plans for further expansion. Elsewhere, the American utility Energyhas sold part of its interest in a Bulgarian power generation rehabilitation project.

In view of above developments, with not much Foreign Direct Investments (FDI) flowing into

Indias Transmission and Distribution sectors, there is much dependence on the domestic

public and private sectors, which in turn depend on finance from external lending agencies.

The concept of turnkey solutions is being insisted by International lending agencies such as

World Bank, International Bank for Reconstruction and Development (IBRD), Asian

Development bank (ADB), Japanese International Bank (JIB) etc., to ensure quality solutions

within estimated cost and time frame. 26 nos. tenders floated in 2003-04 (from April 2003 to

March 2004) in India, for distribution substations financed by IBRD, ADB and JIB, the

specification were for Turnkey supply of equipment and execution.

The project has been undertaken specifically in the above context, to understand the various

aspects of marketing of turnkey projects and the marketing strategy for turnkey solution

providers in the Transmission and Distribution of Power. The project attempts to identify the

correct marketing strategy for an equipment manufacturer planning to be an EPC contractor,

due to the uncertainties presently involved in the market scenario.


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2.2 Research Objectives

The objective of this report is to understand the changing environment in the power

distribution sector in India and in relation to the global developments, and to analyze if the

equipment manufacturers can take up the challenge of performing the job of Engineering,Procurement & Construction (EPC) contractor. To study the reform process in India as

compared to the other parts of the world and analyze, the shift towards the turnkey

procurement from the traditional method of loose equipment purchase. In the process to

determine the marketing strategy towards turnkey solutions in distribution of Power with

specific reference to Equipment Manufacturer as EPC Contractors. The broad objectives may

be further split as below:

1. To study the relevant concepts of marketing and strategic management required to

formulate strategies to market Turnkey solutions to electric distribution companies.

2. To appreciate the electric power scenario and reforms implemented in the power sector

around the world, as compared to India and to have an understanding of the business

environment in the power distribution business in India as per following parameters:

a. Current status

b. Government initiatives in the area

c. Likely effect of the reforms

3. To analyze the buying pattern of the SEBs / Utilities in India in the pre reform era andthe effect of the reforms on the buying pattern of the customers in India.

4. To assess the forthcoming demand in the electric power distribution business in India

based on the following parameters

a. Demand Estimation

b. Priority of requirement in the area

c. Breakup of demand in product & services and turnkey solutions

5. To understand the customers perceptions about the marketing elements of the majorplayers in India, in terms of

a. Quality of products

b. Price of the products

c. Delivery commitment


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d. Reliability of the products

e. Ability to offer after sales services

f. Ability to be a turnkey solution provider

g. Importance placed upon technology and financial strength

h. Preference in terms of awarding the contract to EPC contractors vs. Equipment

manufacturers

6. To propose a marketing strategy for equipment manufacturers to be successful as EPC

contractors.

Based on the study and analysis of above data, to get an insight of the requisite marketing

strategy for the equipment manufacturers in providing turnkey solutions to electric distribution

companies.

2.3 Methodology

The following methodology was adopted

Literature survey

Market Analysis in India with use of specific questionnaire for collecting primary data

and relevant comparison to the world developments

Development of strategy for marketing turnkey solutions

2.4 Literature SurveyFor formulating marketing strategies, it is imperative to understand the concepts of marketing

management with specific reference to Industrial Marketing, as turnkey solutions for power

distributions can be considered as Industrial Product. It is also necessary to understand the

concepts of strategic management with particular reference to marketing strategy. Also it is an

essential requirement, to understand the electric power scenario and the reforms being carried

out in this sector in India as compared to elsewhere in the world. The literature survey was

carried out by reviewing the books and articles of renowned authors to build up the framework

for formulation of marketing strategy for providing turnkey solutions for power distribution.

2.5 Market Analysis

The analysis involved

The study of environment

Estimation of plan investment and likely impact in terms of products and services

Data collection from both primary and secondary sources.


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Primary data collection has been done by questionnaire method undisguised, structured form.

Sample Customers were taken from existing and prospective usersState Electricity Boards

(SEBs), Industries, Contractors, Consultants and Independent Power Producers (IPPs). The

data collected was analytically examined. The responses were categorized on the various

variables that affect the buying behavior of the organization. The factors determining customer

satisfaction, which affect repeat purchases, were also critically examined.

Secondary data collection has been done by referring to Indian Electrical and Electronics

Manufacturers Associations (IEEMA) monthly journals, IEEMA production figures, National

Power Plan (1997-2012), APDRP figures and compilation of Notice Informing Tenders (NITs)

published in last 6 months.

A study was made on the market scenario, market identification of turnkey solution concept,

identification of the competition and the customer. The analysis of the research data was made

as the backdrop of this study.

In order to understand the actual requirement of the customer, data collection has been linked

with the objective of the study in each step.

2.6 Strategies for Major Equipment Manufacturers

During the course of the research it has been established that the future is for equipment-based

services. The trend of customers buying the equipment and then doing the erection and

commissioning with in-house staff is not likely to continue for a longer period in thedistribution business. The trend has already started showing results in the higher kV class or

the transmission business wherein the projects divisions of ABB, ALSTOM & BHEL have

outsmarted the substation and line contractors like Jyoti Structures, Techno Electric and others.

Thus in order to formulate the strategy for the Equipment manufacturers we try to understand

the organization of the major equipment manufacturers in the distribution range. The main

manufacturers are ABB, ALSTOM, SIEMENS, CGL and BHEL. The similarities between

these are:


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1. All these companies are multi product companies

2. These are rich in technology and have best design capabilities available in India.

3. These are financially sound and can invest money in the projects.

4. The customers are very much familiar with their products and have a

distinguished quality and brand image for these compared to other small

manufacturers.

5. All these organizations are widely distributed and have presence across all regions

of the country.

However the difference between the above mentioned companies are:

1. BHEL being a PSU and a Navratna gets favors from the government buyers.

2. The procurement policy of the PSU companies is marred by strict rules and

regulations and is governed by the CVC guidelines.

3. BHEL is also required to procure from small-scale industries under direct or indirect

control of the government.

4. The salary and perks provided to the employees of the company are also governed

by the central government rules that somehow create problem in rewarding the right

candidates.

So in order to maintain a uniformity and greater acceptability of the marketing strategy the

four private sector organizations are combined under one head for better acceptability of the

recommendations.

The marketing strategy is identified using the following management tools:

1. SWOT ANALYSIS, TOWS MATRIX and Formulation of SO, WO, ST & WT

Strategies

2. EFE MATRIX and IPE MATRIX

3. SPACE MATRIX ANALYSIS

The following marketing strategy needs to be adopted following the above

analysis.

Having a good combination of products, design capabilities and financial strength

the companies should try to aggressively increase the presence in the distribution

business and gain experience at the earliest.


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4. In the distribution segment the projects are much of smaller financial value so these do

not invite purchase preference for the government organization like BHEL.

Strong marketing efforts are required to throttle competition from the small

contractors that have close proximity to the SEBs.

Outsourcing of the products needs to be improved with back-to-back arrangementor long-term tie-ups with small component manufacturers.

Use of good corporate image to form joint ventures to obtain synergistic advantage.

Focus on the SEBs business, which is also growing due to investments under

APDRP.

To collectively attempt at improving payment terms and other factors through

common bodies like IEEMA etc.

2.7 SWOT Analysis and TWOS Matrix

Situation analysis begins the process of strategy formulation and requires an attempt to find a

strategic fit between external opportunities and internal strengths while working around

external threats and internal weaknesses. There is need to identify alternative ways that an

organization can use its specific strengths to capitalize on opportunities or to avoid threats and

to overcome its weaknesses. In order to prepare the TOWS matrix for the industry, the

individual parameters are hereby listed.

Opportunities

1. Huge investments leading to greater demand of goods and services.2. Demand leading to industry operating at full & over capacity.

3. Better price realizations.

4. Early birds to learn faster and thus achieve repeat orders.

5. Formation of business groups and tie-ups for joint bidding.

6. Level playing field for private & public sector companies.

7. Healthier working environment and increased private sector participation in operation

of distribution circles also.

8. Increased external commercial borrowings or ADB/WB funding leading to better

payment options.

Threats

1. Purchase preference may be extended to distribution sector.

2. Increased in no. of small contractors leading to price war.

3. Emergence of new players in the market like Schneider etc.


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4. Increased Turnkey contracts may effect business of loose sales and also expose

manufacturers to greater risk as EPC contractors.

5. Political pulls & pressures may jeopardize the whole process, raising alarm about

privatization and being anti-people.

6. The overall process of liberalization of power sector is moving at a much faster pace

than the other contemporary countries. This pace could lead to a total breakdown of the

system.

Weakness

1. The procurement process in the companies is cumbersome and subject to auditing.

2. Low exposure to the needs & dynamics of distribution business.

3. Role clarity on the requirement of being an equipment supplier or a solution provider.

4. Acceptance of customers to execute low value high volume jobs.

Strengths

1. Good corporate image.

2. Complete range of product for transmission & distribution.

3. Established brand name.

4. Considered to be having technology & design ability.

5. Strong & wide networks of manpower across India.

Strategies to capitalize on strengths

Having a good brand image and product portfolio of these companies, they should

aggressively defend and increase market share.

Improve internal efficiency and productivity of the employees.

Strategies to improve the weakness

To increase the business to gain more experience and thus learning new ways of executing

substations in lower range more efficiently.

Improve the speed and quality of purchases as the competition in this range is with

small contractors with low overheads.

To create channel partners rather than to operate as individual companies.


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Table: TOWS Matrix for the Distribution Equipment Manufacturers

STENGTHS

Good corporate image.

Complete range of productFor transmission &

WEAKNESSES

Lack of competitiveness. The

procurement process in the

companies is cumbersomeand subject to auditing.

distribution. Low exposure to the needs &

Established brand name. Dynamics of distribution

Conside red to be having business.

technology & design ability. Role clarity on the

Strong & wide networks of

manpower across India.

Requirement of being anequipment supplier or asolution provider.

Acceptance of customers to

execute low value high volumeobs.

OPPORTUNITIES SO STRATEGIES WO STRATEGIES

Huge investments leading Increase market share Improve procurement cycle

to greater demand of goods aggressively. And reduce the process

and services. Present a better way of difficulties.

Demand leading to performing the jobs in tune Execute pilot projects to gain

industry operating at full & with the established brand Experience and minimize

over capacity. name. risks.

Better price realizations. To address the demand in To have a dual role or

Early birds to learn faster all the parts of the nation to Organization structure toAnd thus achieve repeat gain wide spread address the turnkey as well

orders.

Formation of business

experience and exploit the

opportunities.

as loose equipment market.

groups and tie-ups for joint

bidding.

To offer design solution to the

customer.

Level playing field for

Private & public sector

companies.

Healthier working

environment and increasedprivate sector participation in

operation of distribution circles

also.

Invest money in the

Process to have financial

advantage over small

contractors.

Increased external commercial

borrowings or ADB/WB finding

leading to better payment

options.


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THREATS

- Purchase preference may be

extended to distribution sector.

- Increased in no. of smallcontractors leading to price war.

- Emergence of new players in the

market like Schneider etc.

- Increased Turnkey

contracts may effect business

of loose sales and also expose

manufacturers to greater risk as

EPC contractors.

- Political pulls & pressures may

jeopardize the whole process,alarming it to be privatization

and as anti people.

- The overall process of

liberalization of power sector is

moving at a much faster pace

than the other contemporary

countries. This pace should not

lead to a total breakage of the

system.

ST STRATEGIES

To increase lobbying with

the government to prevent

extension of purchasepreference and maintaining

level playing field in the

segment.

To tie up with small

contractors on business

sharing arrangements to

prevent price fall due to

intense competition.

To check the emergence of

new players and be wellprepared to counter them.

To be cautious in the event

of change in government and

the process of reforms falling

off the track.

WT STRATEGIES

Reduce costs to increase

margins.

To train manpower to countethe threats of enhanced

competition and to execute th

jobs efficiently.

Increase the acceptability

in small jobs despite the

preference for sm

contractors and PSUs.

SO, WO, ST and WT strategies listed above are for ALSTOM

Source : Market Intelligence reports of BHEL, Response to Questionnaire and personal

interviews(see 1.4 & 1.5), Powerline & IEEMA journals listed in Chapters 1 to 4.


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2.8 External / Internal Factors Assessment and StrategicPositioning

One way to establish the Strategic Position and actions to be taken is to list the external

factors (EFE matrix) and the internal factors (IFE matrix) and then develop a SPACE

Matrix (Strategic Positioning and Action Evaluation) which was developed by Rowe,Mason and Dickel (Strategic Management and Business Policy a methodical approach,

Addison Wesley 1982). It is a matching tool that indicates the general type of strategy an

organization should follow viz Aggressive, Conservative, Defensive or Competitive. The

technique involves the production of a vector on a matrix where the X-axes represents net

effect of Competive Advantage (CA) and Industry Strength (IS) and Y-axes represents net

effect of Financial Strength(FS) and Environment Stability.

The strategic position of Equipment Manufacturers as EPC contractors and strategies to be

adopted for taking up of Turnkey Projects is depicted below using the EFE, IFE and SPACE

Matrices.

Table: External Factor Evaluation Matrix (EFE Matrix)

Key External factors Weights RatingsWeighted

Score

Opportunities

Huge investments leading to greater demand of goods and

services.0.1 2 0.2

Demand leading to industry operating at full & over

capacity.

0.075 2 0.15

Better price realizations. 0.025 3 .075

Early birds to learn faster and thus achieve repeat orders.0.1 2 0.2

Formation of business groups and tie-ups for joint

bidding.0.05 1 .05

Level playing field for private & public sector

companies.0.075 2 0.15

Healthier working environment and increased private

sector participation in operation of distribution circles

also.

0.075 2 0.15

Increased external commercial borrowings or ADB/WB

finding leading to better payment options 0.025 2 .05


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ThreatsWeights Ratings

Weighted

Score

Purchase preference may be extended to distribution

sector.0.15 4 .06

Increased in no. of small contractors leading to price war.

0.075 3 0.225

Emergence of new players in the market like

Schneider etc.0.025 3 0.075

Increased Turnkey contracts may effect business of

loose sales and also expose manufacturers to

greater risk as EPC contractors.

0.025 2 0.5

Political pulls & pressures may jeopardize the whole

process, alarming it to be privatization and as anti-people. 0.1 2 0.2

The overall process of liberalization of power sector is

moving at a much faster pace than the other contemporary

countries. This pace should not lead to a total breakage of

the system.

0.1 2 0.2

TOTAL 1 2.285

The ratings are as follows

1 The response is superior

2 The response is above average

3 The response is average

4 The response is poor

Source: Market Intelligence reports of BHEL, Response to Questionnaire and personal

interviews (see 1.4 & 1.5), Powerline & IEEMA journals listed in Chapters 1 to 4.

Comments:

The score of 2.285 indicates that the equipment manufacturers are just above average in

their efforts to pursue strategies that capitalize on external opportunities and avoid

threats.


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Table: Internal Factor Evaluation Matrix (IFE Matrix)

Key Internal Factors Weights RatingWeighted

Score

StrengthsGood corporate image. 0.05 3 0.15

Complete range of product for transmission &

distribution.0.25 4 1

Established brand name. 0.05 4 0.2

Considered to be having technology & design ability. 0.2 3 0.6

Strong & wide networks of manpower across India. 0.025 4 0.01

Weakness

The procurement process in the companies is

cumbersome and subject to auditing.

0.1 1 0.1

Low exposure to the needs & dynamics of distribution

business.0.15 1 0.15

Role clarity on the requirement of being an equipment

supplier or a solution provider.0.125 2 0.25

Acceptance of customers to execute low value high

volume jobs.0.05 2 0.1

TOTAL 1 2.56


interviews (see 1.4 & 1.5), Powerline & IEEMA journals listed in Chapters 1 to 4.

The ratings are as follows

1 A major weakness

2 A minor weakness

3 A minor strength

4 A major strength

Comments:The score of 2.56 indicates that the equipment manufacturers are above average in their

overall internal strategic position. However, the different companies need to do the IFE

separately.


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Table: SPACE Matrix of ALSTOM T&D Projects

Internal Strategic Position Rating External Strategic Position Rating

Financial Strength (FS) Environmental Stability (ES)

- Operating Margin 3 - Technology changes -4

- Return of investment 3 - Rate of inflation -2

- Leverage 2 - Demand variability -3

- Liquidity 5 - Price range of competitive

products

-6

- Working Capital 5 - Barrier to entry into market -2

- Cash Flow 4 - Competitive pressure -4

- Ease of exit from business 1 - Price elasticity of demand -5

- Risk involved in business 5 - Consumption pattern -4

Average 3.11 Average -3.33

Competitive Advantage (CA) Rating Industry Strength (IS) Rating

- New product development -5 - Growth potential 6

- Market Share -6 - Profit potential 3

- Product Quality -2 - Financial stability 4

- Product life cycle -4 - Technological know how 6

- Customer loyalty -5 - Resource utilization 4

- Technological know how -1 - Capital intensity 4

- Control over supplier and

distributor

-4 - Ease of entry into market 3

- Vertical integration -2 - Productivity, capacity

utilization

2

Average -3.22 Average 3.56

Directional vector:

X axis: - -3.22+3.56= 0.340

Y axis: - 3.11+(-3.33) = -0.220


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Fig. 5.17 : SPACE Matrix


interviews(see 1.4 & 1.5), Powerline & IEEMA journals listed in Chapters 1to 4.

Comments:

The Equipment manufacturers should follow the competitive strategy. It has strong internal

strengths, which should be used to take advantage of the external opportunities. The equipment

manufacturing companies should go for

1. Joint ventures

2. Market Penetration

3. Market Development4. Concentric diversification

5. Horizontal Integration

6. Price Competitiveness

7. Better procurement of distribution products


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2.9 Conclusion

Recommendations

The study and the analysis of the data gives an insight of the requisite marketing strategy forthe equipment manufacturers. Thus in order to get considerable and profitable share in the

increasingly competitive market, we need greater emphasis on the following areas:

Increasing market shareAim to increase penetration.

Price Competitivenessto meet the levels of the small contractors

Brand building exerciseTo gain customers confidence in the distribution

business also.

The above can be achieved through1. Greater participation in the distribution business for execution of turnkey substations.

2. Pre tendering activities to help customers developing specifications calling for

superior quality products.

3. Increased level ofpublic relations with the customer especially for the distribution

business through dedicated Marketing & sales team.

4. Helping the customer by conducting system studies and advocating the right

equipment at the right place.

5. Improving the flow of information and speed of response towards the customer.

6.Competitive prices and delivery schedules, to meet the levels of small EPCcontractors.

7. Cost cutting exercise within the organization to improve realizations.

8. Awareness about the market development and competitor strategies.

9. Innovating ideas like life enhancement of old equipments, retrofitting old equipments

etc. This will help in increasing the customers confidence.

Key Issues & Concerns

Business Environment

1. SEBs delayed their procurement on account of financial crunch. It was observed that all

the SEBs was postponing or avoiding the investments required in the distribution sector

due lacking of funds. This trend prevailed for a longer period leading to high T&D losses

due to deterioration of the distribution network.

2. The greater numbers of small-scale contractors with deep roots in the SEBs pose

competitive threat. All SEBs had a preferred list of contractors, which were availing


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special benefits due to proximaty to the customer. These contractors posed a major threat

to the manufacturers who our planning to enter the distribution business.

3. The preference for BHEL and other PSUs, which is evident in the transmission sector,

may also converge in the distribution sector.

Buying behavior

4. The customers are not yet willing to upgrade the system from manual to IT enabled

thus depriving the companies likes ABB, ALSTOM and Siemens to use their relays,

which contribute a major portion in the SCADA implementation. This is mainly because

of the uncertainty prevailing in the mind of the customer regarding the long-term

implementation of the programme.

5. The effect of reform process on the procurement pattern is very less. This may

jeopardize the efforts undertaken by the companies to introduce better technology and

innovative execution techniques.

6. The speed of the opening up of the distribution network in India is much faster then

the similar processes held in the comparable nations. This is raising doubts about the

sustenance of this speed in the long run.

7. The political stability in country will be contributing a lot. A change in govt. may lead

to change in governmental policies.

Demand Estimation

8. The demand estimation process is indicating huge potential in the coming year.

However, various assumptions regarding economic and political stability of the countrywere considered during the process. Any change in these factors may lead to unforeseen

implications on the process.

9. The preparedness of the companies to address the distribution business is also a big

question. As per the latest estimates and market reports almost all the major organizations

are operating at optimum capacities and may not be in a position to take further load

without major structural changes.

10. The distribution business is a high volume business with comparatively less margins

as compared to the transmission business. The companies are not yet prepared to take up

this high volume business.


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Competition

11. Scope of the report considers the competition mainly from the equipment

manufacturer and electrical contractors. It is expected that there may be rise in competition

from the players in these segments.

12. In a recent case civil contractor with no prior experience in substations has quoted for33/11 kV substations. The continuation of this trend on large scale may completely change

the total scenario.

Actions to be Initiated

Efforts required for improving business

1. Spec-in Activities: This involves the customer education programme on the

latest trends and technologies. The customer needs to be apprised of these trends andadvocated on including these in the tender specifications.

2. Approvals: The supplier need to get the desired make approved from the

customers and also make the necessary changes in the commercial terms and

conditions of the contract.

3. Identifying major projects: The companies need to identify major projects on

the basis of revenue generation and ease of execution of the contracts.

4. Retrofit business: The companies need to use the design capabilities in

capturing the retrofit business. This will not only provide benefits to the customer but

also prove the design capabilities of the companies. This will help the companies in

future to get business from the customers with favorable conditions.

5. Prequalification actions: In this process, the customers need to be approached

to include certain pre-qualification parameters on the health of the organizations in

financial terms and the experience.

6. Documentations: The companies need to improve the documentation process

enabling ease of flow if information within the company. This will help in improving

the operations of the company and smooth change over in the event of change in

ownership of projects within the company.

7. Exhibitions/Seminars/ Public Relations/ Local Advertisings: The companies

need to improve the public presence in terms of the exhibitions and


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seminars and make the customers aware about their intentions to be major player in

the distribution business.

8. Indirect Business: coordinating with the network to regularly follow up with the

consultants, SEBs, Power Generation Authorities, Major industrial groups.


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Chapter 3

3.1 Improving customer satisfaction by APDRP

It is necessary to search for answers for some questions: Have power sector reforms and

privatization improved customer satisfaction?

The main objective of electricity industry is to achieve customer satisfaction through generationof electricity of the right quality and quantity at an affordable cost and supply to the consumersefficiently whenever and wherever required. This involves planning, design, engineering,procurement, handling and storing, construction, commissioning, operation and maintenance ofpower plants, equipment, transmission and distribution, sale of energy and collection of revenue,management of personnel and finance etc., each a critical task in its own right.

Trained manpower is required at every stage of the above mentioned tasks. Fast advancement oftechnology is making every sphere of the electricity supply industry more and more

sophisticated, requiring special skilled engineers, supervisors, artisans and managers etc. tomanage the industry. The growing concern over environmental degradation and depletion of theconventional energy sources has made the task more challenging. The technical knowledgeacquired from engineering colleges, polytechnics, industrial training institutes and othertechnical institutions needs to be supplemented with applied engineering and managerial skills.These skills are to be regularly updated to cope with the ever progressing and rapidly advancingtechnologies being introduced in the power sector where the speed of obsolescence oftenovertakes the pace of acquisition of a particular skill

Due to the introduction of more sophisticated technology and automation, theMan/MW ratio is declining. The Man/MW ratio in thermal sector in India has declined from 4.71

in the Sixth plan to less than 2.0 in the Ninth plan. In the hydro sector too, the Man/MW ratio hascome down from 6.04 in the Sixth plan to 2.0 in the Ninth plan. The same trend is evident interms of the number of personnel/ million units supplied - declining from 4.6 in 1992-93 to 2.5 in2000-2001, a 45% decrease in eight years.

This indicates the increasing importance of each individual, which in turn makes manpowerquality criteria more demanding. Added to this is the fact that electricity industry is a highlycapital intensive industry. This necessitates the operation of the plants and equipment in themost safe and efficient manner to minimize the cost of supply.

Power sector reforms in India have gained momentum with the initiative of most of the State

Governments in establishing State Electricity Regulatory Commissions (SERC) and restructuringthe SEBs. The reforms are expected to change the way the Indian Electricity Supply Industryhas been functioning for the last five decades and therefore demands major changes in the rolesof technical/managerial personnel at various levels. As power sector reforms involve a numberof complex and intricate issues, the people involved will need to be equipped with specific inputsin terms of knowledge, skills and attitude to enable them to play their changed roles effectively.This policy document is expected to help the stakeholders concerned in discharging the trainingresponsibilities in a more effective manner.


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3.2 Need for a Training Policy

The electricity industry is undergoing transformation through paradigm changes in Government

policies, economic environment and consumer awareness. Unlike the past, electricity generation,transmission and distribution are now considered as commercial activities. Profit is no more adirty word. From this changing business context has emerged a new factor for success: Thecompetitive spirit to achieve higher productivity and customer satisfaction.

To survive in this competitive market, organizations will have to challenge the existing corebeliefs, processes and methodologies and focus on hands-on learning to inculcate the necessaryknowledge, skills and attitudes in their personnel.

3.3 Lack of Emphasis on Training in Transmission & Distribution

About 80% of the total personnel of the Power Sector are engaged in the area of Operation andMaintenance of Power System, Transmission and Distribution. But very little emphasis is beinggiven for training activity in these areas. In view of the rapid technological development in thisfield and introduction of higher AC and DC voltages in the system, greater attention is requiredfor this discipline. Employees working in Distribution constitute the public face of the utility,who have also been provided very little training for communicating effectively with customersand meeting the requirements of the customer. The entire staff is engaged in the maintenance ofa technically complex system at low levels of efficiency and meeting consumer needs is only ofincidental importance.

3.4 DISCOM Technology Trajectory (DTT)

There are multiple solutions across the three aspects of digital technology associated with powerdistribution. Our approach in this chapter is tobriefly highlight the potential trajectory oftransition and adoption of digital technology. This trajectory would provide guidelines for thetype of requirements various distribution companies (and regulators) will face as they invest inequipment and technology in the future. At different points in the trajectory, distributioncompanies will have to assess the current state of technology, organization and regulatoryrequirements, and develop their respective specific solutions andpolicies.To set the context, there are dozens of Utilities in the country, each under different regulatorynorms, facing a different mix of legacy technology and service requirements.

In general, even deployment of IT systems has been niche, mainly confined to billing. Thisprovides a unique opportunity for India to utilize the full potential and impact of evolving digitaltechnologies without the burden of legacy faced by the developed world and become a model forother developing economies. Several of these possibilities were recommended in the first IT TaskForce Report for Power Sector as well and some of the recommendations have been adopted by afew Utilities. This report provides a much more comprehensive and futuristic perspective.Now, we introduce the three possible steps in DISCOM Technology Trajectory (DTT) tohighlight various possibilities of technology transition and adoption.


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DTT defines a long-term transformational journey and thus, the evolution of a DISCOM alongDTT would take anywhere between five to fifteen years depending on the current state.It is very important for a DISCOM to identify which step of the DTT it is currently in and thenadopt an appropriate roadmap.

Step 1: A system for curtailing AT&C losses

This step focuses on low hanging fruits aimed at checking energy losses and equipmentdamages which would yield quick and concrete results including financial gain. The key factorsthat influence high AT&C losses in India are issues like lack of accounting of where the power isgoing. For example, there are parts of the grid which remain unmetered and unmonitored, thereare inaccuracies in measurement/metering and there are leaks in the revenue cycle

(reading/reconciliation, billing/billdelivery, andcollection/realization). Asdistribution comesat the tail end ofthe power valuechain, reduction indistribution losseshas a reversetelescopic effecton the overallvaluea KWHloss saved isequivalent toalmost 1.5 KWHgenerated. Anyapproach ormethodology for

improving the DISCOM operations has to start with reducing the losses. The levels of adoptionof automation, communication and information technologies used in this step.Goals achievable in DTT Step 1 include:

Reducing AT&C losses. Introducing transparency and accountability Ensuring strict enforcement, organizational and process change management

The technologies that must be implemented in this step include:

Digital power measurement meters at the substation and Distribution Transformer (DT)level as well as at high value customers and remote sensors in substations

Communication mechanism for collating consolidating the meter readings into a centraldata store and communication mechanism for data flow from sensors to control centre

Information Systems for analyzing data to identify discrepancies, conducting energyaudits, generating bills and supporting collection and enforcement, reflecting theutilization of equipment and enabling effective management of the same and optimal


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matching of demand to supply. For effective asset and customer indexing, GIS platformimplementation should start in this step.

In this step, the ability of the DISCOM to enforce existing laws and bring to book the offendersof power theft is essential in realizing the benefits. A few DISCOMs have been relatively

successful in prosecuting culprits of power theft and as a result, lowered their losses due to theft.A precursor to prosecution is detection, and the technologies described in this level can beconsidered a necessary condition for preventing significant losses. Stakeholders who find thisstep attractive must realize that the sources of benefit for such a system are limited. Flexibility toimplement advanced schemes is also limited due to the currently installed technology. Withinthis level the distribution company will be able to measure the power consumption, but will notbe able to remotely control much of the power consumption at the consumer level.Also, the distribution company will be unable to determine the exact location of outagesremotely. As indicated earlier, the focus is on historical accounting, instead of operationalcontrol. For example, this system cannot intelligently signal load control during a period ofshortfall.

While it is beyond the scope of this report to present exact numbers, indicative estimates suggestthat the investments in such a system will be substantial. The exact numbers will vary based onlegacy equipment, exact design and network topology. If any Utility has an ageing infrastructure,then it is simpler and cost effective to invest in newer technology.For example, electromechanical meters, which require replacement in any case, can be replacedwith advanced electronic meters.

Step 2: A system for achieving operational efficiency and customer service excellence

This step is achievable in the medium-term. This progressive step implements some of theadvanced technologies realizing many ofthe benefits. The challenge is to design such a system,so that it can be modular, and open to be upgraded towards the ultimate system. It is important torealize that any hardware installed should last for perhaps 10-15 years, while IT undergoes manygenerations of change in these many years. The levels in the adoption of automation,communication and information technologies are illustrated bellow.


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Goals achievable in DTT Step 2 include: Operational efficiency through better asset operation optimization and human resource

utilization Customer service excellence Automated remote control of all substations and feeders Laying of ground work for achieving the next level of smart grid

In this level, the power distribution companieshave the ability to measure and control the flow ofpower to almost all customers on a nearreal-time basis. For such a solution, advancedmeteringand advanced SCADA systems needto be implemented. The advanced meteringwill involve theability to measure powerconsumption at a reasonably high frequencyat least hourly, but ideally once every 15 minutes, and transmit it back to the central office viaa communication network, which may be dedicated or shared or provided by a third party. Onthe central office side, the distribution company must have the ability to store this stream of real-time data and use it for billing as well as analysis for decision support in network operations.An important aspect of successfully implementing this step is to design a system that is scalableand flexible to accommodate the most plausible changes over the coming decades.The technologies that must be implemented in this step include:

Remote sensors at the substation and feeder levels Reliable communication mechanismbetween all meters and data centre for flow of meter

data at appropriate intervals, communication mechanisms between the transmission anddistribution control centers, establishment of a disaster recovery centre to ensure businesscontinuity

Integration with additional information systems like Energy Management, OutageManagement including Field Force Automation as well as complex billing. In addition to


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these, this step is an appropriate stage to start implementation of enterprise systems likeFinance, Accounting and HR management

Step 3: A system towards evolution of smart grid

This step is an ultimate vision for a smart, IT-based system for power distribution where one can

monitor and even control every kWh flowing through the system. This step is to infuse smarttechnologies in the distribution network to develop a smart grid, which can bend and sway withthe power flows. The distribution network works on the laws of physics, but with sufficientsmartness, it can become flexible enough to accommodate the loads placed on it instead of beingrigid and breaking down.The current state of monitoring and automation in the distribution network only enables reactivebehavior on the part of the network operator as well as the network equipment. For example, theoverloading of a line is detected only when breakdown occurs. A purely reactive action is to tripthe line, though such surgical actions have their own cascading effects. Contrast this with theability to predict the overloading of the line! This can be achieved through proper monitoringand control systems, supported by necessary analytics tools.

Once the signs of overloading are spotted, actions can be taken to reverse the trend in apreventive manner. This may mean that some of the consumers may be deprived of power forsome time. But it can avoid indefinite tripping, since restoring tripped lines may take a longertime. This is an example of how the network collectively adapts to the needs as they evolve,rather than just reacting to the evolved needs.Such adaptive behavior on the part of the network requires a very high granularity in datareadings, and the power system seamlessly interfaces with customer equipment to signal pricingand grid stability conditions. The adoption of automation, communication and informationtechnology aspects of digital technology is represented in the illustration that follows.


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The goal of DTT Step 3 is to create a smart grid (also called Intelligent Grid or Flex Grid) that is: Adaptive and self-healing Interactive with consumers and markets More secure from attacks Capable of accommodating all generation and storage options Capable of accommodating bi-directional energy flow for net metering Predictive rather than just reacting to emergencies Distributed across geographical and organizational boundaries Integrated with enterprise, merging monitoring, control, protection, maintenance, EMS,

DMS, markets, and ITThe technologies that must be implemented in this step include:


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Remote sensors at DT level, smart meters at various points including homes to aid inmeasuring two-way power flows

Extremely reliable and high bandwidth communication mechanisms to measure andcontrol devices

Additional information systems like Energy Trading and Risk Management, Net

Metering and Demand ResponseGiven the ability to measure the power consumption at a fi ne granularity, the distributioncompanies can potentially set the price of power based on Time-of-Use (ToU) or even real-timefor example, hourly basis.

This ability to charge on a real-time basis can help shape consumption, reduce peak loads to anextent and help shift certain loads to other times of the daywhen the price may be lower. Animportant aspect of real-time pricing, which may be available to only a select set of consumers,is the need to communicate the real-time price to the consumer. Hence, this system would need atwo-way communication between the meters and the central office.A system that implements real-time pricing assumes that the consumers are sensitive to the price

of power. This price sensitivity will lead to Demand Side Management (DSM) where consumerswill proactively change their demand or consumption patterns over the period of a day,depending on the price visible to them.Another possible behavioral change will be the use of efficient appliances or appliances that canswitch off based on the price signals received from the Utility. In the short run, consumers wouldmanually control their loads, but over time, standards for automated and intelligent loads couldmanage this process effortlessly. On an average, the changing patterns of consumption will(relatively) flatten the demand for power over the period of a day.There are a number of other benefits from such a system, including critical peak management toavoid blackouts and grid failures. Today, load-shedding affects large areascities or evenregions. Instead, such a smart system, combined with a remote connect/disconnect switch, canenable all homes to receive a lifeline level of power supply2 or 4 amps, even during periods ofshortfall. Alternatively, consumers could have multiple circuits within a facility grouped byessential and non-essential loads. In times of low supply, the distribution authority couldselectively disconnect certain non-essential loads to prevent complete blackouts. Thisconfiguration would ensure that the consumers still obtain some Utility from the electric gridwhile facing diminished supply. Specialized users like hospitals, water pumping stations andtraffic lights would continue to receive power.While real-time pricing via real-time measurement and control of power provides significantbenefits to the electric powergrid, there is an opportunity to leapfrog existing systems byenvisioning a much more futuristic power grid. With increasing difficulty in establishing largepower plants (either coal fi red, hydro or nuclear), switching to distributed small-scale generationof power will soon become a high priority exercise. A viable option for many households wouldbe to invest in solar panels (PV or thermal) and produce heat and electricity, especially for peakperiods. They could act as suppliers to the grid over some periods of the day and buy back therequired consumption during the night. This requires the right pricing incentives, such asdifferentiating between peak and off-peak power, given a sizeable fraction of the population ofconsumershome as well as industrial customers, could choose to generate their own peakpower and sell the surplus to the grid. If such an option is implemented, the challenges to


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manage the grid increase considerably. The inability to control the quantum as well as quality ofsupply will impose greater challenges to those managing the grid.Advanced metering would be essential for this level of implementation. While most meterswould measure the consumption of power in (near) real-time, certain consumers that alsoproduce power will have additional metering functionality to measure the supply of power back

to the grid in real-time. In such a scenario, the grid managers should be informed about the real-time parametersquantity as well as the quality of power being supplied, power factor (reactivepower), transients and harmonics. From a regulatory perspective, one must conceive real-timeprices for consumers as well as real-time buy-back prices from suppliers. Even more so thantoday, grid stability and power quality would be important issues to consider while developingmechanisms to determine prices. There are other unanswered questions and challenges beyondthe regulatory approval for such advanced pricing schemesmatters concerning fairness andequity, placing a subset of consumers at a disadvantage with such granular pricing, even thoughit is estimated that the society would be better off at an overall level. In addition, there are issuesof system security and privacywhose responsibility is it to interface and manage the data?Utilities do not want responsibilities within the home (else, they run the risk of being accused of

damaging a consumers appliance), but consumers also do not want additional operationalburdens; no consumer would want to waste time awaiting pricing information from the meter athome.The solution to this includes new standards, devices, and automation to take advantage of suchsystems.

Steps inducted by some PDCL.

NDPL (North Delhi Power Ltd) adopted advanced technology for improvementin financial, operationaland customer service performance

Adopted AMRDA (Automated Meter Reading and Data Analysis) system that remotely

downloads data from high-value meters to a central location. It helps in billing anddetecting tampering and theft

Introduced SMS-based Fault Management system using GSM which ensures that the nosupply complaints lodged by a consumer get addressed quickly

Introduced walk-in consumer care centres handled by Customer Care Executives underthe supervision ofCustomer Relation Officers and Customer Service Officers

Introduced centralized call centre for all complaints and enquires

Introduced consumer portal for providing online usage and billing data along with onlinepayment facility and complaint/request registration

Implemented advanced distribution SCADA system, GIS, ERP for operational efficiency

Andhra Pradesh: Southern Power Distribution Company Ltd (APSPDCL) uses advanced IT functions


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Implemented CAT (Consumer Analysis Tool) software to integrate billing and collectiondata from Private Accounting Agencies (PAA) and consumers. This software revealsexceptions to be followed up by the field officers. It also generates reports on meterirregularities, collection irregularities and First Information Report (FIR) for theft cases

Implemented Common Billing Software (CBS) to ensure that all PAAs are on a commonplatform and generate uniform data for superior quality of data maintenance

Adopted the Transformer Information Management System (TIMS) to managedistribution transformers and track transformers through their life cycle. It helps invendor analysis on transformer performance

Improved customer service through Customer Service Centres, Call Centre,Computerized Collection Centre, Spot Billing and e-Seva

Digital technology roadmap

Before embarking on the Digital Technology journey described in the previous sections, it isimportant for DISCOMs to have a vision and a phased roadmap. This vision is meant to beregularly reviewed as the implementation progresses and technology evolves and advances, butthe fi rst phase of implementation will be critical and it will be the foundation for the remainingphases. There are virtually infinite digital technology based solutions associated with powerdistribution.Our approach is to briefly highlight various technology initiatives across the three steps of DTT.These initiatives are mere placeholders and we recommend that each DISCOM carries out itsown analysis as it invests in equipment and technology.

An example of a future roadmap for the DISCOMs is depicted in the illustration that follows.

However, before deciding on various digital technology initiatives, the DISCOMs are required todefine their business strategy followed by an overall enterprise architecture strategy, whichincludes standardization and optimization of theirbusiness processes, identification of to-beinformation systems landscape, as well as the to-be infrastructure landscape. Also, a DISCOMneeds to clearly understand the DTT step currently applicable; so that it can define a customizedroadmap for its transformational journey The DTT roadmap provides a list of initiatives to beundertaken across the three aspects of digital technology. While, this roadmap is self-explanatory, following are some specific reasons for prioritization of these initiatives:Automation

Given the immediate need for DISCOMs to measure the energy flow through their network atvarious points, AMI meter installations at feeder and DT levels as well as at HT consumers,

which is a main source of revenue becomes imperative. In parallel, substation and feederautomation set up gains importance from an operational efficiency standpoint. AMI meters arethen installed in phases for all retail consumers. In parallel, automation of all distributionequipments at feeder/DT-levels is done. As a step towards the smart grid, the ability to integratewith distributed generation sources needs to be accomplished. Finally, the aim is to achieveautomation of the grid for bi-directional energy flow at every point.Communication

While AMI meters are installed at feeder/DT/HT consumer-level, the DISCOMs need to


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think of a reliable communication network setup to get meter readings in an automated fashion.In the long run, this would provide the benefits and returns expected out of the investment. Acommunication technology choice for substation/feeder automation needs to be criticallyevaluated and selected. This is critical to get the most out of automation initiative investment.

For retail consumer meter readings, communication choice needs to be differentlocal collationof readings followed by bulk communication over network, for cost effectiveness. From a datacentre and branch office connectivity standpoint, communication technology choices are fairlymature. This would help in getting the best returns from investments on business applications.Information Technology

For curtailing the AT&C losses which is an immediate need for DISCOMs, there is certain basicdata that needs to be in place. This includes customer and asset indexing. While this is beingdone, it might be a good idea for DISCOMs to look at GIS as the base platform which aids in


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better user experience as well as ongoing maintenance of such data. Billing and Collection(enhancements if such a system is already in place), Energy Accountingand RegulatoryReporting systems follow next.

A comprehensive Meter Data Management(MDM) initiative could be taken up next as theanalyses and integration of meter data provideDISCOMs with the insight to manage the demandprofile for optimum efficiencies. Customer Information System (CIS) and evolution to acustomer self-service portal is the other track DISCOMs could plan next. SCADAimplementation is a long-term initiative which has to start from substations, then to feeders andfinally to the rest of the distribution network like DTs. This spans across Steps 1 and 2.Load forecasting is an important track that needs attention as a part of DTT Step 2.This will help DISCOMs in managing their power procurement and basic energy tradingrequirements. A comprehensive Enterprise Work and Asset Management system is a basic steptowards developing information systems supporting overall network operations. In parallel to

this is when a DISCOM can look at implementing comprehensive Energy Management andDistribution Management systems including Outage and Trouble Call Management. The timeframe for implementation of Enterprise applications like Financial Accounting, HR/Payroll andSupply Chain Management is best left to the needs of a DISCOM. A Knowledge Managementsystem needs serious consideration as part of DTT Step 2 to tackle the ageing workforce issue.Finally, as part of DTT Step 3, there could be quite a few new systems like Net Metering,Demand Response Management and Energy Trading and Risk Management. This list is notcomprehensive and we expect such systems to evolve based on the business needs as the smartgrid unfurls. Analytics for decision support and an enterprise analytical dashboard are importantinitiatives for DISCOMs to get a handle on the overall enterprise performance. This dashboardwill only evolve over a period of time where data flows from transactional systems which

themselves are evolving. Similarly, the implementation of Service Oriented Architecture is alsoincremental in nature and evolves through the three steps of DTT.


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Chapter 4

4.1 Customer Information System- CIS

Understanding customers is a very important and challenging area for any business enterprise.Among the many challenges, the most crucial one is the islands of systems that track thebusiness dealings of a customer with the enterprise. e.g. A customer of a bank gets tracked indifferent systems for deposits, credit cards, loans, etc. Bringing all this information in a commondatabase is very important for One View of a customer. This needs integration of multiple

systems, data cleansing/ de-duplication and creation of Master information. This can effectivelylead to datamarts for customer information, and address audit/ statutory requirements. Theseviews can effectively feed into a CRM solution too, to help effectively manage customerrelationships.

4.2 Transforming your customer information system brings risks- and

rewards

For every utility, the customer information system (CIS) is the critical backbone of customercare operations. From customer care and metering to billing, payments and credit andcollections, these applications enables the customer experience and support all aspects of billingand revenue collection. Yet, in most utilities, legacy systems simply are not equipped for todayschallenges and opportunities.As utilities continue to face the strong likelihood of upward cost pressuresas well as regulatoryrequirements around rate structure and smart meteringtransforming theCIS is fast becoming a strategic and operational imperative. After recognizing the necessity ofmaking changes to the CIS, your utility faces a host of questions and considerations. Amongthem: Should the CIS be upgraded or replaced? Which software package best fits your businessneeds? What risks should you be aware of when deploying a new CIS solution? And finally,does it make sense to enlist the help of an integrator or manage this large initiative in-house? CIStransformation is a herculean effort. It typically involves a financial investment of $50 million to$100 million or more, it can take years to complete and it introduces a host of potential pitfalls.Done poorly, a CIS transformation initiative can wreak havoc, leading to incorrect accountinformation, incorrect billing, unexpected down time and unexpected system performance issues.Yet, high-performance businesses, including utilities, recognize that CIS transformation can alsobring significant rewards. To help mitigate risk and maximize results, high performers engagethe expertise of an integrator. They recognize the advantages of working with the right integratorversus going it alone. Specifically, they know that an integrator can help reduce the risks aroundpoorly defined scope, a lack of business and/or operational readiness, an IT support organizationthat needs new skills, and poorly executed deployment.

CIS transformation.

A typical CIS business case is based on several key levers that can reduce cost by up to 35percent through process and operational efficiencies enabled by technological improvements.


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4.3Accentures approachto CIS transformationIn delivering CIS transformation solutions, Accenture relies upon a proven four-phase approach:analysis, technical integration, support and outsourcing or staff augmentation. Depending onyour utilitys needs, you can engage Accenture for one or all of these phases. In the analysisphase, we develop an understanding of your business needs and how your current CIS elementsand functionality are meeting, or falling short of, those needs. We help determine yourrequirements for your new or enhanced CIS, and then we recommend one or more options forbridging the gap between where you are and where you need to be. In the technical integrationphase, we analyze your existing business processes and help you in selecting a CIS softwarevendor based on your technical and functional needs. Just as important, we design and build therequired customizations to the vendor solution, along with migration processes to transfer legacydata to the new system. We also oversee testing, user training and the actual deployment of thenew system.Accentures support continues beyond your go-live date. We monitor and assess system andoperational performance, identifying opportunities for further adjustments.We also provide additional user training and support, as needed.In the fourth phaseoutsourcing or staff augmentationAccenture helps in identifying rolesand responsibilities that our employees can fulfill. By transitioning application and/or operationalsupport processes to Accenture, your utility can improve customer satisfaction and reduceoperating costs through increased efficiency. Whats more, this approach helps you betterprepare for new retail capabilities as they emerge. In assisting utilities with their CIStransformations, Accenture draws upon significant strengths. Those strengths include our: Asset-driven approach. Accenture has more than 2,000 leading practicedeliverables,sourcecodeandtoolsthatwehaverefinedthrough CIStransformationprojectsaroundtheworld.Reusing these assets improves solution quality and reduces costs. Proven delivery experience. Accenture has a global network of CIS professionals whohave accumulated years of experience delivering similar systems in the utilities industry.Engaging reputable experts to design and deliver can reduce costs and impacts to operationsupon deployment. Strong vendor alliances. Accenture extends our technology and business capabilitiesthrough a powerful alliance network of more than 150 market leaders and innovators, to provide


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our clients the be

Documents

Fundamental Analysis and Impact of APDRP on Customer Satisfaction