Background
RDSS has
been launched with a noble objective of enhancing the quality, reliability, and
affordability of electricity delivery to consumers by fostering financial
sustainability and operational efficiency within the Distribution Sector, achieve
nationwide AT&C losses within the range of 12-15% by the fiscal year
2024-25 and attain a zero-gap between the ACoS and ARR by the fiscal year
2024-25. Since its launch, RDSS scheme & SBD have been amended several
times to incorporate new conditions.
The scheme
comprises of metering, Distribution infrastructure, project management and
capacity building with an outlay of Rs.3.03 Lac Crore and GBS of Rs 97,631
Crore (around 32%). The primary emphasis of the program lies in Advanced
Metering Infrastructure or smart metering, aiming to deploy 25 Crore pre-paid
smart meters systematically under TOTEX (CAPEX+OPEX) under DBFOOT model by
2024-25 in all consumer premises, excluding Agriculture consumers. This
directive is in accordance with the Ministry of Power Notification No.
23/35/2019-R&R dated August 17, 2021. In the scheme, the average unit meter
cost has been provisioned as Rs.6000 with 15% subsidy capped at Rs.900 per unit
making total provision more than 1.5 Lac Crore. The OPEX payment to AMISP (Advanced
Metering Infrastructure Service Providers) by the discoms will be on
successfully managing the system for 93 months after its installation. Besides
AMI, the scheme also includes components relating to Distribution
Infrastructure, Project Management and Capacity Building. Therefore, the
success of the RDSS scheme primarily hinges in the success of smart metering
rollout for consumers as well as Distribution Transformers.
Currently,
there are 51 AMISP registered with most of them not having any experience of
working with the discoms and are primarily aggregator/integrator of different
components of the scheme. As per the National Smart Grid Mission, so far
installation of around 17.5 Crore meters have been approved under RDSS scheme
out of which orders have been placed for 7.26 Crores and deployment have not
started in most states and signing of SLA is delayed due to various issues.
Benefits
Smart
Metering offers tremendous technical advantages to the grid stakeholders. The
discoms are benefitted by way of:
a)
Improving Billing Quality.
b)
Remote
Disconnection/Reconnection for arrear recovery from defaulters.
c)
Real
time information of Outage, resulting in timely redressal.
d)
Remote
intelligent data analysis (pinpoint irregularities
e)
Identification
of theft prone areas/consumers based on smart data analytics.
f)
Effective
System health monitoring.
g)
Better
monitoring of Billing, Collection, and Supply Management etc. with more
reliable and near real time data.
h)
Feeder/DT
wise energy accounting and better planning for reduction in AT&C Losses.
i)
Support
for load forecasting and regulatory compliance
Regulators
benefit from access to reliable statistics, which aids in efficient planning
and tariff determination. This data is instrumental in designing innovative
initiatives such as Demand Response, Storage, Time of Day (ToD), and Time of
Use (ToU) tariffs. Additionally, regulators can easily monitor Standards of
Performance, System Average Interruption Duration Index (SAIDI), and System
Average Interruption Frequency Index (SAIFI). This robust information
infrastructure facilitates the introduction of innovative services like
peer-to-peer energy transactions and behind-the-meter services.
In essence,
the AMI or smart metering and data-driven insights not only enhance the
operational efficiency of LDCs but also empower consumers and regulators,
fostering a more dynamic and responsive energy ecosystem.
Critical Assessment
While the
technical and financial advantages of rolling out smart meters into the
distribution sector are evident, the success of this initiative relies on a
thorough process of identifying, assessing, quantifying, and mitigating all
associated risks related to legal, technical and financial dimensions to ensure
an acceptable cost-benefit ratio. Unfortunately, some significant risks still
lack adequate mitigation measures. To illustrate these risks, I will delve into
the specific statistics of Uttar Pradesh discoms to evaluate the likely success
of the scheme.
1. Exclusion of Smart Grid as an
Objective
India has
undertaken a National Determined Contribution (NDC) commitment to attain 50% of
its installed capacity from non-fossil fuel-based energy sources by 2030.
Simultaneously, it has set an ambitious Renewable Purchase Obligation (RPO)
target, aiming to achieve 43.3% of its total energy from renewable sources by
the same year through the installation of 500 gigawatts (GW) of renewable
energy sources. Although there is a disconnect between the target of achieving
50% installed capacity as per NDC and 43.3% energy through RPO because the CUF
of renewables is much lesser, but that aspect can be ignored for the time being
.
As the
fundamental structure of the grid transitions from the traditional base load
and peak load based plants to a more flexible model involving Distributed
Energy Resources (DERs) and Electric Vehicles (EVs) etc., there is a pressing
need for large-scale integration of distributed renewable energy resources. Effectively
managing this evolving grid requires the implementation of a smart grid, which
incorporates intelligent components such as smart meters, Supervisory Control
and Data Acquisition (SCADA) systems, sensors, and more. In essence, the
deployment of a smart grid infrastructure becomes a critical enabler for
achieving India's renewable energy targets. However, the RDSS scheme is focused
on only reducing AT&C losses through smart pre-paid meters and includes
only a small insignificant component for training / Smart Grid Knowledge Center
by way of GBS of Rs. 30 Crore to CPSU Power Grid and does not encompass the
broader scope of a smart grid even when a huge sum of more than 3 Lac crore is
proposed for the scheme.
2.
Inadequate funding and no burden
sharing amongst the stakeholders
The scheme
outlines the installation of 25 crore meters with an average cost of Rs. 6000
per unit, including a GoI subsidy provisioned at Rs. 900. However, due hto the
compressed time frame and other conditions of the Standard Bidding Document
(SBD), the discovered bidding prices have escalated by an average of 30%-35%.
In the recent bidding for Uttar Pradesh's distribution companies (discoms),
encompassing 9 clusters, the discovered prices ranged from Rs. 7307 to Rs. 8428
per unit. The total cost amounted to Rs. 29,612 Crores, surpassing the RDSS DPR
estimate of Rs. 21,834 Crore by 35.66%. This additional expenditure of Rs. 7785
Crore, equivalent to about 3.5 years of admissible Return on Equity for the
discoms, has to be funded by discoms itself as no financing is available from
the scheme beyond the DPR. The discoms also face the challenge of being unable
to pass on the smart meter costs to the consumers since regulators contend that
consumers have already paid for the meters cost while taking connection and
can’t be forced to pay again. Furthermore, a Ministry of Power letter
(F.No.14/02/2021-UR&SI-II-Part(1)(E-258136) dated 16 Sept.23) exempts
consumers from any payment towards smart metering costs.
GoI subsidy @ 15% with the ceiling of Rs. 900 per unit, which discoms have to pay on the Operational Expenditure
(Opex) to the AMISP works out to be less
that the 18% GST it pays on the average cost of Rs. 8000 per unit.
Consequently, the entire burden of increased smart metering costs has to be borne
by the discoms, and its recovery through efficiency gains from improved billing
and collection ratios may prove challenging.
3.
Disproportionate high Cost for AT&C
Reduction
The notion
that smart pre-paid metering will effectively curb AT&C losses and yield
financial benefits for discoms poses a significant challenge and is contingent
upon the consumer’s consumption profile. In Uttar Pradesh (UP), under SAUBHGYA
scheme, over 1.2 crore consumers were added, most of which falling into the
Lifeline category. As per audited Trued up statements for FY 2021-22, the
number of Lifeline consumers in UP is 1.45 Crore, constituting approximately
45.3% of the total consumer base of 3.21 Crores. The total energy consumption of these lifeline
consumers was 11.893 billion units (12.68% of the discoms total energy
consumption) with an average of 68 units per month and their average electricity
bill remained below Rs. 300. Further, as per the discovered price through
bidding, discoms are obligated to pay approximately Rs. 80 per meter per month,
translating to more than 25% of the revenue collected from these Lifeline
consumers who pay monthly bill of less than Rs.300 and constitute around 45.3%
of discoms consumers. This is in stark contrast to the discoms' average
AT&C loss, which was around 20%. So, in a way, if smart pre-paid meters are
installed in these lifeline consumers’ premises, the cost of these meters will
be more than 25% of revenue from these consumers. The issue is not unique to UP
only as many states that have also added Lifeline consumers under the SAUBHGYA
initiative and may encounter similar challenges, potentially jeopardizing the
financial viability of the Advanced Metering Infrastructure (AMI) program.
If the
primary objective is to instill financial discipline and mitigate AT&C
losses through improved collection methods, traditional pre-paid meters, at a
1/4th of smart meter’s cost per unit, could have justified the cost benefit,
however higher financial cost for the Advanced Metering Infrastructure can only
be justified with the technical and economic benefits by the smart grid
objectives and not merely with AT&C loss reduction.
4.
Gaps in Target categories and One
Size Fits all Approach
The
Ministry of Power (MoP) notification dated 17-Aug-2021 has granted an exemption
to Agricultural consumers from the mandatory use of smart pre-paid meters. It
is noteworthy that in many discoms partly camouflage higher AT&C losses by
showing them as unmetered agricultural consumption to avail agriculture
subsidies from the government. Metering agricultural consumers is necessary for
energy accounting and targeted subsidy/DBT etc. Excluding agricultural
consumers from the mandatory use of smart meters will only serve to perpetuate
this anomaly. Moreover, as the scheme is centralized, it adopts a
one-size-fits-all approach for discoms, despite variations in consumer
profiles, load duration curves, capacities, and other factors influencing
AT&C losses across different regions.
5.
Legal Risks- No Choice to the consumers
and takes away their grievance rights
The Smart
Pre-Paid metering system under RDSS faces risks associated with specific
provisions of the Electricity Act 2003 that remain un-mitigated. For instance,
Section 47(5) includes a provision implying consumer consent for pre-paid
metering, stating, "if the consumer is prepared to take supply through
pre-payment meter." However, both the Ministry of Power (MoP) notification
and the Scheme have removed the consumer's option of choosing
"pre-payment" and instead made it mandatory. It is noteworthy that
businesses in distribution, such as telecom, typically provide consumers with
the choice in this regard.
Likewise,
the provision for mandatory prepaid meters installation also conflicts with
Section 56 of the Act, which mandates a minimum 15 days' notice before
disconnection even in case of non-payment of bill. This essential feature is
currently absent in the scheme. Denying consumers this right would impede their
ability to dispute erroneous bills, a right expressly granted under the Act.
Besides these, the technical and regulatory challenges exist in providing net
metering connections to the consumers under rooftop solar schemes through
compulsory pre-paid smart meter mode.
6.
High Financial Risk for AMISP
Although
Rs. 1.5 Lac Crore has been earmarked under RDSS for smart metering, the unit
prices discovered in the bidding process suggest that the anticipated project
cost for installing 25 Crore meters will exceed Rs. 2 Lac Crore. AMISPs have to provide this on DBFOOT model
for around 10 years concession period.
Thus, the AMISPs are exposed to a long duration of financial risk
related to steeper penalties for their non- performance of long list of
obligations, faulty meters under warranty etc.. It may be noted that while BIS
provides of manufacturer warranty of 5.5 years, RDSS demands warranty for the
duration of concession i.e. around 10 years adding on to the cost of project.
Moreover, a
significant number of AMISPs possess a limited equity base and are resorting to
higher leveraging. The inadequate financial capacity or lack of willingness of consumers especially the lifeline consumers to meet their payment obligations may result
in the disconnection of their supply, pose a risk of shrinking revenue streams
of discoms and, consequently, to the AMISPs, as no supply translates to no
payment. This situation could potentially expose their lenders to
non-performing assets.
7.
Technology Risk for AMISP
The cost of
smart meters supply is only an event in the overall project, with the
predominant focus on the process of operation and maintenance of associated IT
infrastructure over the concession period. In this regard, the role of IT
especially the telecom plays an important role. The diminishing footprint of
GPRS technology raises concerns about its effectiveness, and the initial lower
cost of 2G communication may give rise to operational challenges in the future.
With approximately 60 crore smartphones, characterized by high Average Revenue
Per User (ARPU), dominating the spectrum usage, the introduction of an
additional 25 crore GPRS/GSM/VoLTE/5G based smart meters could lead to heightened
competition for spectrum resources, potentially escalating communication
charges. Moreover, a parallel development observed in Europe underscores the
risk of hidden costs related to Intellectual Property Rights (IPR) fees, with
technology companies claiming ownership of IPRs in 3G, 4G, 5G, and NB IoT
technologies and thereby exposing AMISPs to these risks.
As grid
operations evolve towards increased flexibility and real-time responsiveness,
the true advantage of smart meters lies in retrieving consumer data every 15 minutes,
if not every 5 minutes. However, with 25 Crore consumers, even at a 15-minute
interval, a substantial volume of data will be generated. Effectively managing this vast dataset while complying with the data
privacy laws and ensuring robust cybersecurity measures will present a
formidable challenge for AMISPs in fulfilling their obligations.
Conclusion
In
conclusion, the objectives of RDSS Smart meters should go beyond only reducing
AT&C losses, as these gains are achievable through conventional pre-paid
meters as well at a much lower cost. The objectives should encompass smart grid
to justify the high cost with associated higher benefits of smart grid. The
smart grid will facilitate flexible generation, distributed renewable energy
source integration, and effective load management. The rollout should strive to
unlock the full spectrum of smart grid features, providing technical advantages
for discoms, consumers, grid operators, and regulators, contributing to the
overall efficiency, reliability, and sustainability of the electrical grid.
The limited supply of meters and a shortage of
technically proficient personnel, the expedited smart meter rollout within a
condensed timeframe has led to increased costs, making the cost-benefit ratio
unviable. Therefore, it is recommended to extend the rollout duration to effectively
address these challenges and reduce the implementation cost and enhance the
technical benefits.
Smart
meters offer potential for targeted subsidization, but the current grant
allocation is insufficient. It is crucial for the State/Central Government
Grant to be increased, covering a minimum of 50% of the cost. This augmentation
is essential to align with the National Determined Commitment of de-carbonization
through renewable integration, extending funding beyond ratepayers to include
taxpayers. Lastly, to ensure inclusivity, comprehensive coverage should be
extended to all consumer categories without any data exclusions and private
discoms should also be deemed eligible under RDSS to achieve complete coverage
and maintain a fair playing field.
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