National Training Programme For Rural Electricity Distribution Franchisees

10-12October,2011 Venue: JKPDD. JAMMU

Franchisee Arrangement Options /Franchisee Models

Contents
Need for Different Franchisee Models Model A: Collection-Based Revenue Franchisee

Model B: Input-Based Revenue Franchisee

Model C: Input-based Franchisee Model D: Operation and Maintenance Franchisee Model E: Rural Electric Co-operative Societies

Model

F:

Electric Co-operative Society-Operation Management through Contracting

Need for Different Franchisee Models

Different model for urban and rural area because of the scale of operation, nature of responsibilities involved 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

Contd.
Different roles and responsibilities and hence different models.

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 the status of distribution network in the franchised area for providing appropriate feedback to the utility.
Franchisee not responsible for system improvement

 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 target
Drawback of this system is that the franchisee is not a partner in loss reduction since its compensation is linked to the revenue collections made and not on the energy input coming into the area.

Model A

TARGETS SET BY A UTILITY S.No. Collection Efficiency Incentive % of the collected revenue. Upto 60% = < 70% = < 80% = < 90% No Incentive 3% of the revenue over 60% (2) + 4% of the revenue over 70% (3) + 4% of the revenue over 80%

1. 2. 3. 4.

5.

= < 100 %

(4) + 4% of the revenue over 90 %

Franchisee is also a partner in loss reduction

Model B
Revenue Franchisee Input Based

The operations and remuneration under this model are similar to that of the collection franchisee. The basic difference is in the target setting mechanism by the utility. The input energy into the area covered by the franchisee is measured by the utility while the target for revenue collection is set based on the collections made as a percentage of the input energy supplied to the consumers beyond the point of metering by the utility. Measurement of the energy input can be at:
11 KV feeder level Distribution Transformer level

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

 Input-based Franchisee

Model C

The Franchisee needs to purchase electricity at a predetermined tariff from the Utility termed as 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 KV transformer.
Below the input point all the commercial activities are undertaken by the franchisee including supply related consumer complaints

Franchisee is extensively involved in loss reduction and collection efficiency improvement since 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 operating expenses) and the amount to be paid to the Utility for the Energy Input to the Franchisee to the designated area.

Model D
Operation and Maintenance Franchisee
Similar to the Model C the franchisee has to purchase electricity at predetermined rate The Input rate is dependent on the anticipated cost of Operation and Maintenance of the 11 kV and LT network in the Franchisee area. These costs can be considered while calculating 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 be taken

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

Full Service Contract Franchisee

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.

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 through operation 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

Various Models Across India

S No.
1

Name of the State

Assam

Model
Single Point supply through User association

2
3 4 5

Gujarat
Haryana Karnataka Nagaland

Jyotigram
Input Based Franchisee Under Implementation Gram Vidyut Pratinidhi Village Electricity Management Board

6 7
8 9

Orissa Uttar Pradesh

Uttrakhand West Bengal

Village contact person approach Collection based Franchisee, graduating to Input based Franchisee
SHGs/NGOs SHGs/NGOs/CBOs