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9.1 The process of power sector reform has
been initiated with a number of noteworthy
initiatives such as the enactment of the MP Vidyut
Sudhar Adhiniyam 2000, formation of new companies,
their functioning in an independent manner as well
as focus on efficiency improvements and loss
reduction. While this is an encouraging start, the
Commission would like to emphasise that reform and
ultimate turnaround of the financially weak
utilities cannot be achieved merely by tariff
revision processes. The combined efforts of the
newly formed companies as well as the cooperation
and support of the consumers & the State Government
would be critical in accelerating and sustaining the
pace of reforms. The Commission shall continue to
play a facilitative role with a framework and
approach, which, is comprehensive, balanced and
transparent, helps in performance improvement of the
companies and ultimately benefits the consumers of
the state. The Commission has identified a number of
areas, which need to be undertaken on priority by
MPSEB, and it’s successor entities. These are
discussed below. The Commission would closely
monitor the progress of the Board/successor
companies and expects them to report the progress on
all the key areas on a periodic basis
9.2
Unbundling of MPSEB
9.2.1 Unbundling of MPSEB has been
initiated by formation of new companies which are
functioning from July 1, 2002 under an Operations
and Management Agreement with MPSEB. However, the
Commission strongly feels that the complete process
of unbundling of MPSEB should be accelerated and
concluded at an early date by determining the
opening balance sheets of the successor companies
and transferring the Assets and Liabilities of the
Board to the respective entities. The Commission
had, in their order dt 16 July 02 stated that the
companies should start functioning independently
within 12 months of the order. The current status of
the progress in this regard is not known.
Nevertheless, the Commission would like to emphasise
that the finalisation of transfer scheme would
enable the independent functioning of the companies
in its true sense, help identify inefficiencies in
the system, create a competitive environment, bring
greater sense of purpose and focus as well as
responsibility and accountability in their
operations
9.2.2 The finalisation of transfer scheme would
also enable issue of licences to the companies and
the determination of tariffs for the respective
unbundled entities. Therefore, the Commission would
like to stress the urgency and need to complete the
above processes in a time bound manner and directs
the companies to expedite the associated activities,
complete the same and report progress.
9.2.3
Management of the successor entities
The formation of companies with their independent
Board of Directors is a welcome step towards the
independent working and commercial orientation of
the companies. The companies must leverage the wide
ranging experience of the Board members to improve
their operations by initiating better management
practices and ensuring focus on rapid efficiency
improvements in each of the areas of the respective
businesses. The companies must attempt to benchmark
their workings with the industry best practices and
prepare an action plan for achieving the same. For
this, if there are specific investment plans, the
Commission would be open to examining them and allow
the associated costs in the revenue requirements of
the companies. The Commission also feels that
employee performance should be linked to an
incentive/ penalty mechanism, which will accelerate
efficiency improvements in each of the areas. The
Commission directs the companies to prepare a
comprehensive performance incentive scheme and
implement the same by 31 March 2003. The design of
the incentive scheme should ensure the following :
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Employee performance should be closely
linked to the company’s goals and strategy.
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It should be clearly defined, measurable and based
on standards of achievement that are controllable
by target employees.
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It should have a good measuring and
recording system to ensure that performance is
correctly captured and rewards are timely.
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It should be amenable to easy understanding,
be transparent and clear to all employees.
9.3
Management Information Systems
The need and importance of a comprehensive
Management Information Systems can hardly be
overemphasized as it provides valuable information
on the true extent of T&D losses, unauthorized
connections, bills that are not based on meter
readings, quantum of arrears, age of arrears,
performance records of divisions, etc. in a timely
manner to enable corrective actions. MPSEB should
initiate all steps to improve the MIS and implement
it, as it will help MPSEB, MPERC and the State
Government in planning and supporting critical
decisions of the reform program. MIS can help the
companies prioritise investment program, direct
efficiency improvement efforts and reward employees
for their efficient performance.
The Commission directs MPSEB and their successor
entities to develop an implementation programme on
Management Information Systems along with the
details of Energy Audit programme and submit the
same to the Commission by 31 March 2003. The
investment plan for the same should be submitted
considering all the available financing options such
as funds and grants from GoI, GoMP, financial
institutions and multilateral funding agencies. The
Commission would be willing to consider the
incremental annual costs of such an implementation
programme in the future estimates of Revenue
Requirement of the utilities.
The Commission has also examined the current
information requirements from MPSEB for performance
monitoring. The formats and the details of
periodicity of their submission shall be issued
separately by the Commission.
9.4
HRD and Training
The Commission recognizes the urgency and need for
training and upgrading the skills of the MPSEB’s
employees. Changes in technology and operating
practices place a demanding requirement on MPSEB and
its employees to understand new technologies,
improve their own performance and thereby make
valuable contributions to the turnaround efforts of
the utility. The Commission directs MPSEB to develop
Human Resource Development and Training budgets with
greater emphasis and focus on training to adopt
computerized technologies in all aspects of MPSEB’s
functioning. MPSEB should therefore develop
structured training program for all its employees
and implement the same in a timebound manner. The
expenditure on training and development for
employees would be eligible for inclusion in the
Annual Revenue Requirement.
9.5
Customer Care
There is an urgent need to strengthen customer care
related initiatives, as it is important to establish
the utility’s credibility and restore the confidence
of the consumers. MPSEB needs to implement better
grievance redressal mechanisms including Customer
Care Centres, better customer complaint handling
system, etc besides effecting improvements in system
reliability. The Commission directs MPSEB and the
distribution companies to study the practices and
improvement initiatives undertaken in other States
and plan the implementation of similar systems in
Madhya Pradesh.
9.6
Technical Standards and Codes
The process of reform and operation of the companies
in an unbundled environment necessitates formalising
the Commercial and Technical Interface arrangements
amongst the utility companies. Developing and
implementing Grid Code, Distribution Code, Metering
Code as well as the Performance, Security and Safety
Standards would help the companies improve quality
of supply to consumers. This is important, as
consumers will expect to improvement in quality as
their tariffs go up in the process of rebalancing.
The Commission directs the companies to commence the
preparatory activities such as identification of
interface/energy transfer points, verifying the
adequacy of metering arrangements, developing drafts
of the Codes as well as undertaking discussions
amongst the grid constituents on the draft of the
respective codes. MPSEB shall indicate a
comprehensive timetable on each of these activities
within the next two months.
9.7 Metering and Energy Audit
Ensuring appropriate metering in a timely manner and
completing energy audits at different voltage levels
and divisions would enable determination of losses
at the different voltage levels and design of
tariffs in an efficient manner such as tariffs based
on cost of supply at different voltages, two-part
bulk supply tariff, seasonal and time-of-use
tariffs, pricing of reactive energy etc. MPSEB shall
submit a monthly progress report on status of
metering at various interface as well as consumer
points and the results of energy audits being
conducted all over the state beginning from January
2003.
9.8
Technological Solutions
Rapid advancements in technology have seen
development of innovative and cost effective
solutions in the area of wireless communication and
data transfer. The utilities must harness these
technologies to improve power distribution and the
management of distribution business especially in
the areas of metering, including remote metering,
spot billing and collection systems, which will
maximize revenue.
9.9
Governance is the Central Issue
Finally, the Commission feels that while it is
important to focus on PUF improvements, cost
reduction, loss minimization and efficiency
improvement measures, the need for boosting the
employee morale through improved governance. is
perhaps of greater and immediate importance to
ensure that the employees are motivated to make
valuable contributions. The condition of the
utilities currently functioning with insufficient
resources can be improved significantly only by
better corporate governance, which motivates change
in work culture and performance of employees through
proper communication and implementation of effective
and sustainable management practices. Restructuring
cannot be successful if dealt with in isolation and
without good corporate governance. The Commission is
confident that such an environment geared to
improving the standards of performance and
delivering the highest quality of service would
restore the confidence of the consumers who would
respond and support the utility’s efforts by timely
payment and honest practices.
Ordered as above.
Sd/-
(S. IQBAL HUSAIN)
Member
(Power)
Sd/-
(P.K.MEHROTRA)
Chairman
Bhopal
30th November, 2002 |
