POWER SECTOR REFORMS: DEVELOPING COUNTRIES PERSPECTIVES

Indrajit. N. Trivedi 'and Girish. J. Bhatt *

1. Yokohama National University, Japan 2.Gujarat Electricity Board, India

ABSTFUCT
Since last few decades many developed and developing countries have tried the deregulation in different
sectors. For dcveloping countries like India ,the task of power sector unbundling becomes more critical due to large gap
between generation and peak demand, lack of resources, insufficient transmission network, less efficient distribution,
lack of impiementmg newer technology faster, uncertainty in revenue returns, heavy social diversity etc. On the other
side, in India telecom sector deregulation has been initiated and it has given positive signs till now. While experiment
of Orissa has failed in case of power sector deregulation. The problem more or less remains same for developing
countries. In this paper we have tried to discuss basic frame work and problems for initializing deregulation in power
sector and the necessity of creatlng regional and national data base . We have tried to show the information needed to
be compiled. Also,the need of effective reforms and restructuring process and new transition models for deregulation
has been identified in this paper.

Keywords :Power System Deregulation JPSD), Power Sector Restructuring (PSR), Basic Frame Work (BFW)

INTRODUCTION AND GLOBAL SCENARIO
In the global scenario, word " Deregulatfon "is not new
now, Different countries has laid down pdicies
directing towards deregulation in different fields like of
Engg., Telecom sector, Power sector etc., as it is need
of time. Power sector deregulation talks has been
started since last two decades in the connection
different countries like USA, Germany, Australia,
Newzeland , Argentina, Chile, Republic pf Guinea,
Panama, Norway and Peru, has initiated the process. In
many cases, out comes are positive but every one is not
confirmed for future vision.
The process of deregulation in power sector is very
difficult and complex task, as it involves many agencies
and its boundary touches to all most all. In many
developed countries ,where, in spite of many positive
technical and other infrastructure, the success reached is
not satisfactory due to lack of proper mechanism,
monitoring and decision making.
INDIAN SCENARIO
The Government of India has brought out an integrated
bill, replacing the present Electricity acts. The
Electricity Bi11,2003 has been passed in parliament
June.,2@@3is drafted on the basis of wide ranging
consultation with stake holder and opinion makers in
the Electricity field. The bill contains salient features
pertaining to Generation, Transmission, Distribution
and electricity market as well.
The Electricity Act, 2M3 Important facts and
figures
1 .Power is today a basic human need. It is the critical
inftash-ucture on which modern economic activity is
fully dependent. Only 55% households in India have
access to electricity. Most of those who have access do
not get uninterrupted reliabk supply. The industry in
India has among the highest tariffi in the world and is
not assured of the quality of supply. In this era of
globalization, it is essential that electricity of good
quality IS provided at reasonable rates for economic
activity so that competitiveness increases. Being
internationally competitive is now essential for
achieving the vision of 8% GDP growth per annum,
employment generation and poverty alleviation.
2. In recent years the financial health of SEBs has been
deteriorating, There is a big gap between unit cost of
supply and revenue and lhe annual losses of SEBs have
been increasing and have reached unsustainable levels
(over Rs. 33,000 carores).
3. Jn the last two Plan periods, h r e l y half of the
capacity addition planned was achieved. The optimistic
expectations from the IPPs have not been fulfilled and
in retrospect it appears that the approach of inviting
investments on the basis of government guarantees was
perhaps not the best way. The energy as well as
peaking shortages acrms the counby is a matter of
concern and the situation would have been
worse but for the slowdown in manufacturing sector.
4. The authcrities have set before the nation the goal of
electrifying all our villages by 2007 and all our
households by 2012. Access is yet to be provided to
about 80,000 villages. Uninterrupted and reliable
supply of electricity for 24 hours a day needs to become
a reality for the whole camtry including rural areas.
Enough generatvlg capacity need to be created to
outgrow the situation of energy and peaking shortages
and make the country free of power cuts with some
spare generating capacity so that the system is also
reliable. The sector is to be made financially healthy so
that the state government finances are not burdened by
the losses of h s sector. The sector should be able to
attract funds kom the capital markets without
government support. The cansumer is paramount and

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 he should be served well with good quality electricity at
reasonable rates.
5. The objectives of the Act are “to consolidate the
laws relating to generation, hm”ssion, distribution,
tradmg and use of electricity and generaliy for taking
measues conducive to development of electricity
industry, promoting competition therein, protecting
interest of consumers and supply of electricity to all
areas, rationalization of electricity tariff, ensuring
transparent policies regarding subsidies, promotion of
efficient and environmentalIy benign policies,
constitution of Central Electricity Authority, Regulatory
Commissions and establishment of Appellate Tribunal
and for matters connected therewith or incidental
thereto.”
NEED FOR BAISC FRAME WORKS
For developing country like India, the necessary
changes to be made for deregulation is real complex
problem. One model policy can not work for all state
constituent as large financial. social , industrial and
natural diversities are in existence. One has to be very
careful for designing sustainable path and process for
power sector reforms and restructuring for independent
state. The practical difficulties and their solutions,
lessons iiom failure of reforms just like in case of
Orissa has to be learnt and care should be taken in
implementing same model and methodology.The basic
kame work includes setting process for plannmg,
setting 8; monitoring paths and directions for reforms
and restrucnrring including sub-sector performance
parameters and inclusion of competition at different
levels finally leading to technical and consumers
benefit.
NECESSITY OF RESTURTNG AND REFORMS W
POWER SECTOR
The root cause of policy failure in the reforms
process in power sector, perhaps, i s the p m
financial state of the electncity Boards.
The lack of competition i n all sub sectors i.e.
Generation ,Transmission ,Distribution.
Poor quality and reliability of supply
The commercial losses of SEB’s shoot up to Rs.
33,000 Carore. currently which was nearly 5000
carore in the early nineties. This is, however, due to
effective subsidy provided to agriculture and
domestic consumers and it was not compensated
h o u g h cross subsidization and government
subsidy payment to SEB’s. Revenue collection and
tariff structure needs immediate attention for I n d m
power sector
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PROBLEMS FACED BY INDIAN POWER
SECTOR FOR REFORMS
e Poor Private investment & poor financial
health of SEB’s.
Different factors responsible for T & D losses.
c Electricity Gird & Grid Discipline.
c Power exchange at intra regional and inter -
regional level.
c Power supply position i.e. Reliability &
Quality of Power
Will to reforms.
Subsidy paymentsby the government.
Proper Metering Systems and Reliable Data
hdanagement skills and reduction of losses
Human resources developments and training.
Privatization methodology
Proper and impressive role of central and state
level regulation commissions.
NEED MIR CREATING REGIONAL AND
NATIONAL DATABASE
As country llke India, are real integration of difference
diversities and being geographically wide, there is
strong need of creating Regional and National Database
which can be used to reflect the past and present status
in different sub sectors. Both , technical and non-
technical matters should be inclusive in data base that
can give real practical situations and solutions. There
should be intra region, inter region data available . Mer
linkmg of these data can give amazing results and out
come, Which, other wise can’t be known. Central and
Nodal agencies should be formed which can collect,
store, classify and integrate the data with dfferent
database, It can help a lot for &agnostic study for any
region and setting and measuring performance
parameters in power sector which can be further utilized
in planning and operational stages.
DJSCUSSION AM) SUGGESION
1. Major problem encountered by different SEB’s
and utilities is of financing the reforms, payments of
subsidies, balance between cost realization and actual
cost, tanff rationalization
2. It is suggested that all SEWS, utilities and
government should come out with well defined vision
(long term & short term), clear balance sheet of SE3’s
pertaining to Generation, Transmission ,Distribution
with performance parameters.
3. To achieve above, in consultation with
developed countries and academic institutes clear
statement of fiance, technical (Generation,
Transmission , Distribution), present and hme
planning should be prepared and should be made open
to public. This will help for private (NatimaI &
 Multinational) partners to know the real scene and
future parmipation can be fixed up.
4,Consolidated surveys should be carried aut for power
quality and reliability issues in aI1 the three sub sectors
i.e. Generation Transmission & Distribution.
5 Capacity addition target can be curtail down by
making consumer awareness, by making
interconnection for interstate, inter grid and between
neighbouring nation and by tradlng power by these inter
connections.
6.Large possibilities are there for power trading within
nation for regional grids and between nation. By
establishg proper vision ,policy, mechanism and
r e g u l a t q rules, dfferent category tradmg is possible.
The issue should be well discussed before finalizing
related policies and rules.
7,Augmentation of present transmission system should
be carried out, proper actions should be taken out for
hlly utilization of existing transmission network by
replacing old conductors, by giving optimum reactive
power support and lastly by utilizing new generation
FACTS devices and advanced pool mechanism.
Transmission Pricing, Wheeling charges ,allocation of
losses with and without reserve margin, congestion
management are the real areas to work within existing
transmission should be discussed and it should be
kamed into viable laws and legal Erame a work.
S. Distribution reforms or privatization is most crucial
and import area in power sector reforms.
Distribution area is a suffering many illness in
different by sectors. Except few major cities rest of
distribution is through SEB’s only. Main problem faced
in this sectors are.:
Old wires and Heavily overloaded
equipment.
I n s a c i e n t staff compared to large
geographical area which includes rural
area.
+ Will to work.
Improper metering and a non meterug .
High T&D Losses.
Theft of Energy.
Poor Power Quality
Less trained staff.
4 Misconception of privatization and
deregulation.
9.There is urgent need in distribution sector that tariff
should be rationalized or tariff restructuring process
should be initiated. Heavy cross subsidies and n m
payment from government against it, makes situatian
more worsen. State regulatq commission should come
out with proper structured tariff and it should be
discussed with utilities and government as well.
Government should be more serious towards these
issues because it is fundamentally important and on
bilateral side. Government should also take
responsibilities during reform process for subsidy and
budgetary support to exitmg and for coming utilities.
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10.Grid operation and Grid management should be
given top importance looking to the possibilities of
open market structure and large participation of
different utilities in transmission and distribution of
power . Gptlmal Power Dispatch with advance
instrumentation and SCADA, Energy Management
Systems ( EMS), Fast Restoration T e c h q u e s should
be carried out. Role of ISO( Independent System
Operator) time bidding , Grid operation and security
etc. should made precise and back bone regulatory and
legal frame work should be done , In Power tradmg
situations grid dwipline and maintenance of Load
Frequency control are the prime topic to be considered,
for basic hame work
1 l.hhjor power system models for deregulation
includes
1. Monopoly at all level ( Adopted by Frame and
many Asian countries).
2. Single buyer- wholesale purchase agency (
Adopted by Northern Ireland, Few Asian
Country).
3. Whole sale competition (Adopted in UK)
4. Wholesale and retail competition ( Adopted in
UK ( part), Sweden , Norway, Newzeland and
US)
In India we have tried single buyer Model in Onssa but
it has failed due to multilateral reasons ,followed by
adoption of same model in Hariyana and
AndhaPradesh, for which c o n f m result are awaited
yet. To start with, it is easy model but consequences
following it ,should be properly dealt with. In fact one
single buyer model can’t work for scenario like Indian.
There should be Initial Midterm (Transition) and final
models formed , which may be short term and long
term as necessity arises. Initiation can be with single
buyer model but after it is sustained for reasonable time,
wholesaie competition must be introduced either by
pool e x c h ~ g or
e power trading with appropriate viable
regulation and market administration. In between
government should take lackmg financial responsibility
if needed and then after required modifications, me can
switch over to long term sustainable physical model.
Their is enough potential of pool treading in India.
CONCLUSION
Looking to the different topics concern, power sector
reforms in Incha or in any developing country is not
handy job if it is taken as whole . O n e model policy can
not work looking to diversified conditions. There is
need to have the transition models to move towards
total deregulation. Extensive help from developing
countries and academic instituies should be taken
during process. Fast Decision making, proper regulatory
mechanism & legal kame work with strmg political
will ,will accelerate the reforms to sustainable and
reliable path and to win - win situations. Proper
 technical infhtructure development program under
reforms must be observEd with achievable gmls.

ACKNOWLEDGEMENT

Authors wishes to thank authorities of different S.E.3

for their useful guidance and fruitful discussions.

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%Different web related to power system deregulation.

AUTHOR ADDRESS

The first author can be contacted at :

Division of Electrical and Computing

Yokohama National University,
79-1,Tokawadai,Hcdogaya
Yokohama, JAPAN
e-mail: trivediin@edifhail.com

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