4Franchisee Arrangement Options

7/29/2019 4Franchisee Arrangement Options

1/15

National Training Programme For Rural

Electricity Distribution Franchisees

10-12October,2011Venue: JKPDD. JAMMU


2/15

Franchisee Arrangement Options/Franchisee

Models


3/15

Contents

Model B: Input-Based Revenue Franchisee

Model C: Input-based Franchisee

Model D: Operation and Maintenance Franchisee

Model A: Collection-Based Revenue Franchisee

Model E: Rural Electric Co-operative Societies

Model F: Electric Co-operative Society-OperationManagement through Contracting

Need for Different Franchisee Models


4/15

Need for Different Franchisee Models

Different model for urban and rural area because of

the scale of operation, nature of responsibilitiesinvolved and financial commitment required.

There can be different model depending on the kind

of prospective franchisee in a given area specially in

rural area:

Individual Entrepreneurship history

Extent of involvement and empowerment of Panchayats

Presence and willingness of Co-operatives in the area Presence of NGOs and SHGs in the area, their present

activity structure and their willingness to undertake

franchisee


5/15

Contd. Different roles and responsibilities and hence

different models.


6/15

Model A Collection-Based Revenue Franchisee

Primary duty of the Franchisee is Revenue Collection

Monthly revenue collection targets are decided by the franchiser

Intended role is limited to billing, revenue collection, complaints redressal.

Franchisee to also facilitate release of new service connection and keeping vigil on thestatus of distribution network in the franchised area for providing appropriate feedback tothe utility.

Franchisee not responsible for system improvement


7/15

Model A The remuneration to the franchisee is in terms of:

Margins (which will be a percentage of collections) on

achievement of the target

Penalty for not achieving the target

Incentives for exceeding the targetDrawback of this system is that the franchisee is not a partner in loss reduction since itscompensation is linked to the revenue collections made and not on the energy inputcoming into the area.


8/15

S.No. Collection Efficiency Incentive% of the collected revenue.

1. Upto 60% No Incentive2. = < 70% 3% of the revenue over 60%3. = < 80% (2) + 4% of the revenue over 70%4. = < 90% (3) + 4% of the revenue over 80%5. = < 100 % (4) + 4% of the revenue over 90

%

TARGETS SET BY A UTILITY

F hi i l t i l d ti


9/15

Model B Revenue Franchisee Input Based

The operations and remuneration under this model are similarto that of the collection franchisee.

The basic difference is in the target setting mechanism by theutility.

The input energy into the area covered by the franchisee is

measured by the utility while the target for revenue collectionis set based on the collections made as a percentage of theinput energy supplied to the consumers beyond the point ofmetering by the utility.

Measurement of the energy input can be at:

11 KV feeder level

Distribution Transformer level

Franchisee is also a partner in loss reduction


10/15

Computation of bulk supply tariff (BST) for sustainable operation:

Net revenue collection by franchisee = Rs. X

Total expenses:

Cost of O&M = Rs. A

Cost of capital investment and working capital = Rs. B

Anticipated return on capital investment @ 14%= Rs. C

Net revenue after deduction of expenses and return = X-(A+B+C)

Total estimated energy input = Y kWh

Estimated BST = Rs. [X-(A+B+C)]/Y


11/15

Model C Input-based Franchisee

The Franchisee needs to purchase electricity at a predetermined tariff from the Utility termedas Bulk Supply Rate (BST) and distribute in the designated area.

The energy is measured at pre-decided input point for example 33KV side of 33/11 KVtransformer.

Below the input point all the commercial activities are undertaken by the franchisee includingsupply related consumer complaints

Franchisee is extensively involved in loss reduction and collection efficiency improvementsince the franchisee gains are proportionally linked to the AT&C loss improvement.

The Franchisee earnings is the gap between the collection (after meeting all his operatingexpenses) and the amount to be paid to the Utility for the Energy Input to the Franchisee tothe designated area.

d l


12/15

Model D Operation and Maintenance Franchisee

Similar to the Model C the franchisee has to purchase electricity at predeterminedrate

The Input rate is dependent on the anticipated cost of Operation and Maintenance ofthe 11 kV and LT network in the Franchisee area. These costs can be considered whilecalculating the BST by the Franchisee

The reduction of T&D losses are necessary to earn higher profits by the Franchisee

Complaints need to be attended by Franchisee and necessary action needs to betaken

The income is dependent on the level of billing & collection is the area of prime focusby the Franchisee

Full Service Contract Franchisee


13/15

Model E Rural Electric Co-operative Societies-Apart from the roles as Input based franchisee they

need to act to:

State to authorize the creation of traditional electric

cooperative society that is organized, owned and

operated by its members.

The society owns the distribution utility assets and is

responsible for all utility functions including operations

and maintenance, metering, billing and collections,

accounting and finance, procurement, stores and system

planning and expansion.


14/15

Model F Electric Co-operative Society-Operations

Management through Contracting

In this system the Co-operative society may outsource

the activities to other agency/organization throughoperation contracts

The Society shall carry all the activities of the Input

Based Franchisee by itself or through its agency

Input rate predetermined for the Franchisee

V i M d l A I di


15/15

Various Models Across India

S No. Name of the State Model

1 Assam Single Point supply through Userassociation

2 Gujarat Jyotigram

3 Haryana Input Based Franchisee UnderImplementation

4 Karnataka Gram Vidyut Pratinidhi

5 Nagaland Village Electricity Management Board

6 Orissa Village contact person approach

7 Uttar Pradesh Collection based Franchisee, graduatingto Input based Franchisee

8 Uttrakhand SHGs/NGOs

9 West Bengal SHGs/NGOs/CBOs

4Franchisee Arrangement Options

Documents

Transcript of 4Franchisee Arrangement Options