Monday, November 23, 2015

An agenda for distribution sector reforms

I blogged earlier on my skepticism with power sector reforms. My concerns arise from deep-rooted fundamental problems that afflict the sector and not the details of the financial restructuring plan. 

On the face of it, the distribution side of power ought to be technically the simplest to manage. Power flows without any transactional engagement by the discom. The purely operational transactions done by the discom are secondary and just three - repair and restore supply when interrupted, replace non-working meters, and do periodic operation and maintenance (O&M). And then there are the management issues of releasing new services, spot-billing, and theft detection and disconnection. The discoms do none of these to any reasonable degree of satisfaction. State capability and political economy constraints bind big-time. And even if we get this right, we run into the twin challenges of free farm power and low tariffs. 

The limited technology adoption, archaic processes, low level of professional competence among field-level engineers (a reflection of our workforce employability crisis), limited large and credible enough local service providers (spot-billing, transformer and other equipment servicing, O&M contracting of services etc), unionization, corruption etc are first order problems. They are amplified many times over by weak state capability, sensitive electoral politics, and inherently complex nature of the problem, all of which make technology adoption, howsoever beneficial, a very difficult challenge.

I have blogged earlier here, here, and here on this and am being deliberately provocative in arguing that technology solutions like GIS, SCADA (maybe DA, but surely not SC), DTR (transformer) metering etc are not going to happen in even our best discoms (power point presentations in conferences and seminars apart!) anytime for the foreseeable future. In a difficult and constraining environment, a strategy that focuses on these first-best solutions is certain to crowd-out the effective implementation of even feasible second-best solutions. It would detract from the effectiveness of supervision and make the best the enemy of the good!

So what is the way out? Understand the problem, acknowledge it, and then start work on it. As a first-order and non-negotiable requirement, discoms need to measure and audit its energy distribution and bill and collect from services, the equivalent of plain good governance in the distribution side. But this requires real-time metering of feeders, consumer mapping under each feeder (and keeping track of the dynamic downstream LV network), and then rigorous monitoring and enforcement. And the same with billing services, replacing non-working meters, and collecting dues. Simple as it appears, given the environment, this is a super-difficult challenge and unlikely to happen in quick time. Without arguing for a sequential approach to reform, this is an essential pre-requisite for any other reform. 

Technology can be useful here, but not as top-down GIS/SCADA/AMR solutions, as is currently being advocated. The best strategy is to make available the full spectrum of technology and re-engineering options available in the market and let discoms adopt what they can sustain and suit them best. Different categories of technology interventions in energy audits should be implemented across and within discoms and technology solutions should be allowed iterate and evolve. Given the size of the country, the three orders of the interventions (multiple discoms, multiple areas within a discom, and different technologies) should, if done in a focused manner, over a period of time, throw up technologies that emerge as successes and can diffuse into scale.

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