i.Input based Power Distribution Franchisee (IBDF) model has good building blocks to transition into the proposed segregate wire-retail business eventually. To begin with Distribution Franchisee = DNOMA + Retail Supplier, while Distribution Licensee continue to act as DNO.
Some further proposed improvements in the IBDF model:
· Pre RFP Third party audit, authentic asset register creation, ring fencing of DF area, input meter calibration, and devoted point of contact to support transition & all legacy data sharing.
· Strengthening of QR for DF operator selection and its standardization pan India. Joint consortium bidding should be allowed with partners spanning across all key functional work areas for Distribution Mgmt. success:
o Finance (deep pockets to sustain initial losses)
o Network (core competence in Distribution Network products, EPC, O&M, services)
o Metering and Energy Auditing (solutions and service providers)
o Customer Mgmt. (revenue mgmt, CRM, IT solution, CSAT etc.)
· Streamlining existing planned investments (like RGGVY, R-APDRP, NEF etc.) on priority in DF areas and integrating with DF capex requirements
· Design incorporation of Bankers/investors views in RfP and DFA documents (specially deals with SPV structuring, Charge on Collateral or Hypothecation, Escrow mechanism, and Exit)
· Standardisation of some critical calculations for better viability of both DL and DF:
o minimum input benchmarking prices
o ABR based indexation and revenue sharing
· DL to disclose its real avg. power purchase cost and allow DF to bring optimization through different/outside power sourcing, if any.
o The incremental benefit (DL’s avg. power purchase cost – DF’s avg. power purchase cost ) from such power sourcing to be accrued and shared in equal proportion with DL, DF and end-customers.
· Making provision in Tariff calculation for rewarding DF area customers based upon DF’s performance. This is to encourage faster cooperation from end-customers to DF operator.
· The Electricity Duty and TOSE could be collected as deferred payment for 3 months from DF. This can act as good perk and allow DF optimize its working capital mgmt.
· DF operator and DL should jointly be brought under Regulators purview for regular performance reporting
· All other suggestions in this note including specific defined SLAs, independent CSAT, transparent reporting etc.
ii.Few another and more affordable ways to drive competition differently would be through:
· Healthy bidding of Franchisee model (one option suggested below)
· Keeping 2nd bidder as backup if first bidder default on SLA terms. This shall also ensure strict adherence to SLA and also add another private eye on first bidder/operator performance