11th-12th November, 2010 2nd WORKSHOP ON POWER SECTOR REFORMS

BRIEF HISTORY OF IESCO

1998

Creation

Registration

Commencement of Business

OBJECTIVE OF PERFORMANCE CONTRACT (2010):

GOP/MOWP is committed to ensure that Distribution Companies can have: 1. Effective Management

2. Efficient and Quality Service

3. Adequate Operational Autonomy 4. Effective & Strong BOD 5. Effective Internal Controls 6. Business Plans Implementation

OBJECTIVE OF COMPANIES ORDINANCE 1984 & UNDERLYING CORPORATE GOVERNANCE

Objective of Ordinance is to run corporate sector professionally by ensuring in Companies the: Implementation of Business plans

Formulation of Human Resource Management policies

Capital expansion plans Comprehensive Financial Statements and Audit Effective Internal Controls Report on Governance, Risk & Compliance issues Effective Role of management & Board of Directors Safeguard the Interest of Shareholders (St 290)

Does not the Companies Ordinance, 1984 more elaborately cover all the Objectives that Performance Contract intends to???
4

HOW IESCO IS CURRENTLY BEING GOVERNED!

Regulators

IESCO
Auditors Monitoring Agencies

AREA OF CONCERN!
If we all think that Power Sector is still in crisis despite the presence of so many regulators, regulations and Audits then what is the root cause? Either the focus on the implementation of the existing laws missing OR

More efforts are exerted in inventing the new ones

OR We have no plan as how to implement it

OR
Regulations are not in accordance with the need

Under this scenario, something has to be done

so that Single Performance Contract be able to

turn around the whole Power Sector?
6

COMMENTS ON PERFORMANCE CONTRACT

All the objectives of Performance Contract are covered in
Ordinance Legal backup Missing

Focus on Scoring of points results in narrowing down

approach Environment differs from company to company Format is defective as even if the company achieves 100% of the targets set for all the KPIs, the maximum score achieved will only be 65 out of 100 Budgeting control concept has not been properly incorporated & needs to be reviewed
Contd7

COMMENTS ON PERFORMANCE CONTRACT

Strangely targets have been laid for accidents ??? Not fair to link targets with units sold as long as power shortage is there Companies concern may be taken to assign weightages Concerns of Labor union need to be addressed Punitive clauses relating to termination to be revisited

SUGGESTIONS FOR IMPROVEMENTS

As the expectations from Performance contract are very high and this document has become a last resort to turn the table, therefore it needs to be ensured that:

Is the Contract being made between the right persons ?

Will it not interfere in the autonomy of the company ? Should it not be between IESCO Management & BOD?

Whole exercise of revisiting the performance contracts and KPI may be started from afresh by formulating a joint committee of DISCOs, MOW&P,

Donors & Private Sector professionals to achieve the objectives as

desired

KPIs
Operational & Commercial Performance - 50% Line Losses Total Score 15.00 2009-10 11.25 Jul to Sep 10 7.50 To Achieve Max Marks -10 Remarks No Cushion for Companies having low losses to be at 10% No Cushion for Companies having low losses to be at 10% Target for collection for DISCOs having low recovery should be above 100 % Targets based on NEPRA Performance Standards, so margin for +10% above target is difficult In IESCO, proportion of defective meters is low Why O&M Expenses linked with Units Sold?

Collection Ratio

25.00

6.25

8.25

+5

Transformer Failure Rate Line Failure Rate - Below 20 Min Line Failure Rate - Above 20 Min Defective Meters Financial Performance - 8%

2.00 2.00 2.00 4.00 8.00

1.00 1.50 1.00 3.00 4.50

2.00 2.00 2.00 4.00 6.75 + 20 + 10

+ 10

Capitalization - 5%
Capital Expenses 10% Customers Relations Mgt 5% HR Management 12% Employee Safety 10%

5.00
10.00 5.00 12.00 10

5.00
4.50 4.50 12.00 -

3.75
4.00 10.00 4 Target Illogical + 10 Scoring criteria is against the Budgeting Concept

Total Scoring

100

54.50

52.25

10

PROJECTS BEING UNDER TAKEN

11

Power Dist & Enhancement Project (ADB)

Electricity Dist & Transmission Improvement Project (WB)

Proj.Cost: US$58.496M Exp:US$16.288M

Calculation of T/F wise Losses (pilot project undertaken)

Proj.Cost: US$30.06M Exp:US$4.23M Strengthening of Infrastructure

Installation of TOU Meters Achiev: 25 %

ERP Implementation (at Feasibility & Prep. Stage)

(Projects Being Undertaken)

Collection through Bar-Code Readers (expected Dec 10) Coding & Tagging of T/Fs (Initial Stage) GIS based Asset Management (pilot project under survey)

AMI (Advanced Metering Infrastructure) (at Feasibility work Stage)

Consumer Census (Compl. Date Dec 10)

SCADA (at Feasibility study Stage)

12

FINANCIAL POSITION OF FY2010-11

Summary of Major KPIs indicating consumer satisfaction

T & D Losses Collection (Pvt.) Consumers Collection (Gov.) Consumers

Financial Summary indicating Sound financial position:

= = =
Rs. in Million FY (Qtr 1) 10-11 Prov. 17,785 383 5,740 23,908 14,211 1,230 241 15,682

9.2% 100% 56%

As on 30 Sep 10 Description Receivables from Gov t Receivables from Pvt Total Receivables Subsidy Receivable Gross Receivables Power purchase payable Surplus of Receivables Over Payables (A+B-C) Amou nt (Mil) 7,500 2,771 10,271 6,698 16969 (6,311) 10,658

Description Sales Revenue Other Income GOP Subsidy Total Revenue Power Purchase Price Operating Expenses Depreciation Total Expenses

FY 08- 09 (Audited) 38,348 1,432 11,339 51,119 43,866 3,674 930 48,470

FY (Qtr 1) 09-10 13,842 473 4,468 18,783 14,096 926 231 15,253

FY 09- 10 (Audited) 50,219 1,722 15,816 67,757 57,429 4,048 929 62,405

Rising Operating Profit

2,649

3,530

5,352

8,226

Indicates Short Term Strong Liquidity Position 13

SUMMARY OF AJK TARIFF ISSUES

Present Tariff of AJK Paid by AJK Deficit Share of AJK in Govt Billing Share of AJK in Total Billing Total Receivables from AJK as on 30 Sep 2010 Rs. 5.50 / Unit Rs. 2.59 / Unit Rs. 2.91 / Unit 38% 9.5 % 4,909.981 Million

AJK does not want to pay at Govt Notified Rates

Note: Avg Sale is 900 Million units per year

14

MAJOR BOTTLENECKS & SUGGESTION FOR IMPROVEMENT

Sr 1 Bottle Necks Recovery from Govt. Departments Suggestions GOP to take serious Note of it & remove the Budgetary Constraints for Govt Department to ensure timely payments to Discos

2
3

Increasing interference of Sales Power Sector to be declared exempt from Sales Tax Tax Department Audit
Claim of Sales Tax Department to Charge Sales Tax on Supplies to AJK depsite Presidential Order in 2002 to not to Charge Sales Tax on Electricity Supply to AJK Unpaid subsidies Power Sector to be declared Zero Rated or Exempt from the Application of Sales Tax to avoid Cash flow problems as huge amounts of funds of Discos are Blocked as Sales Tax Refund Outstanding Subsidies to be cleared & for future Electricity Tariff may be increased to cover the Gap between Notified & Determined Tariff The Cost of fund against the Relenet Loans to be reduced from 17% to 12% Separate Income Tax Package for Power Sector To be made in line with the understanding between GOP and Govt. of AJK To be made in time Must be avoided for Autonomy of the Companies. Generation Mix need to be focused on
15

5 6 7 8 9 10

High cost of borrowing High Corporate Income Tax Rates Defective Notification of AJK Tariff Delay in Determination of Tariff Political Influence High Generation Cost

DAMAGES OCCURRED DUE TO HEAVY RAIN/ FLOOD ON 27.07.2010 TO 29.07.2010

Sr.

Description

Unit

Total

Amount ( Rs )

1
2 3 4

Structure
Transformers Accessories Cables

No
No No MTR

304
255 19,900 19,996

4,295,154
62,206,766 7,906,717 4,351,136

Grand Total (Rs)

78,759,773

Contd16

THANK YOU

17

KEY PERFORMANCE INDICATORS

Description Consumers, Mil. Peak Load, MW FY 08 1.88 1,522 FY 09 1.98 1,643 FY 10 2.06 1,968 Jul-Oct 10 2.08 1,479

U. Purchased, GWh
U. Sold Losses, % NEPRA Target

8,061
7,232 10.3% 12%

8,071
7,201 10.8% 11%

8,396
7,572 9.8% 10%

3,247
2,950 9.2 % 10%

Var. from NEPRA

Collection Ratio (Govt) % Collection Ratio (Pvt) % Collection Ratio (Total) % AT&C Index (Govt) AT&C Index (Pvt) AT&C Index (Total)

1.7
97.1 98.9 98.4 87.1 88.7 88.3

0.2
91.3 98.4 96.6 81.4 87.8 86.2

0.2
83.6 100.0 95.9 75.4 90.2 86.5

0.8
67 100 92 61 91 84
18

* Tariff Determination under consideration

IESCO ON GOING PROJECTS

Transformer Coding Transformer Coding of 19 Feeders Having maximum quantum of loss from each Division have been completed in September 2010. Transformer coding of 3 Division i.e. City, Westridge & Tariqabad is completed in October, 2010 and remaining i.e. Cantt, S/Town & Rawat will be Completed in November, 2010 Installation of Meters o 50 KVA capacity (General Duty Transformers) three feeders of Islamabad Circle and Capt. Aamir Shaheed Feeder of Rawalpindi Circle fully completed

CONSUMER CENSUS
Consumer census started by Barqab in Rawalpindi Circle as a pilot projects was abnormally delayed. Now IESCO has decided to get it done by its own employee. Format for Consumer Census is being printed and provided to the field formation in November, 2010 Survey will be conducted and completed in December 2010 19

BILLING AND COLLECTION THROUGH SCANNERS

Billing collection through scanners/barcodes readers will be started in December, 2010 as certain preparatory meetings have been held in this context. This will help to improve the collection / remittance mechanism besides rapid flow of information about payment made by the customers on daily basis upto the level of SDO.

AUTOMATED METER READINGS INFRASTRUCTURE

Survey is being conducted by M/S Nortech Hungry based company for AMI it will help on the following areas. Load Management Outage Data

Transformers wise Losses

Detection of Theft Improvement in Customer Services
20

SAMPLE FLASH REPORT

Operational & Commercial Performance - 50% Line Losses Collection Ratio Transformer Failure Rate Line Failure Rate - Below 20 minutes Line Failure Rate - Above 20 minutes Defective Meters - 7-12m as % of total Financial Performance - 8% Target

100% Achievement
Result Weighted Score 7.5 18.75 1 1 1 2 Result

100% Score
Weighted Score 15 25 2 2 2 4

10 % 100 % 183 14 6.4 %

10 % 100 % 183 14 6.4 %

9% 105 % 14.65 % 164 12.6 5.12 %

16.3 % 16.3 %

Cash in Transit (Monthly Average)

O&M Expenses (Rs/kWh) Capital Expenditure Project Implemen.15% Capitalization (Completion of A90 Form)

7%
0.51 75 %

7%
0.51 75 %

1.5
2.5 3.75

6.3 %
0.45 79 %

3
5 5

Capital Expenses
Secondary Transmission & Grid Station
Distribution of Power (DOP) Energy Loss Reduction Program (ELR) Rural Electrification (RE)

75 %
90 % 90 % 100 %

75 %
90 % 90 % 100 %

3.75
1.5 1.5 0.75

83 %
100 % 100 % 110 %

5
2 2 1
21 Contd

SAMPLE FLASH REPORT

D Customer Relations Management - 5% Target
100% Achievement Result i ii iii New Connections Customer Facilitation Efficiency of Supply Complaint Resolution 100 % 100 % 100 % 100 % 100 % 100 % 100% Score Result 100 % 100 % 100 %

Weighted Score
1 1 1

Weighted Score
1 1 1

iv
E i ii iii iv v vi F i ii

Efficiency of Billing Complaint Resolution

Human Resource Management - 12% Officers Strength - Occupancy Ratio Staff Strength - Occupancy Ratio Resolution of Disciplinary Cases Settlement of Audit Paras %age of Officers Trained During the Year %age of Staff Trained During the Year Employee Safety - 10% No. of Accidents - Fatal No. of Accidents - Non-Fatal Total Scoring

100 %
89 % 87 % 77 % 85 % 1% 2% 3 6

100 %
89 % 87 % 77 % 85 % 1% 2% 3 6

2
2 2 1 1 3 3 2 65.50

100 %
89 % 87 % 77 % 85 % 1% 2% 4

2
2 2 1 1 3 3 6 4 100
22

23

STATUS OF VARIOUS ACTIVITIES & PROJECTS BEING UNDERTAKEN

24

DAMAGES OCCURRED DUE TO HEAVY RAIN/ FLOOD ON 27.07.2010 TO 29.07.2010

Sr
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Description
HT Structure LT Structure T/F 200 KVA T/F 100 KVA T/F 50 KVA T/F 25 KVA T/F 15 KVA T/F 10 KVA Steel Cross Arms Dropout Cutout ACSR 7/.186 ACSR 7/.0132 11KVA Disc insuiators 11KVA PIN insulators 11 KV pins 11 KV Capacitor Bank Stay Rod Stay Wire

Unit
Islamabad

Name of Circle
Rawalpindi Attock Jehlum Chakwal

IESCO TOTAL 188 116 86 68 72 24 3 2 190 750 2600 9960 413 455 430 1 43 1620

Amount ( Rs ) 2,780,154 1,515,000 28,234,916 18,827,208 11,540,904 3,086,239 328,919 188,580 547,192 2,093,895 174,200 470,000 213,941 57,850 88,415 350,000 63,966 243,000

No No No No No No No No No No
MTR MTR

57 32 20 19 25 7 1 0 56 97 1400 3500 147 156 131 0 21 1400

35 21 40 17 11 1 0 0 60 186 1200 0 60 60 60 0 0 0

59 46 5 25 23 11 2 0 41 282 0 5640 127 174 174 1 22 220

2 0 0 1 2 0 0 0 0 3 0 0 0 0 0 0 0 0

15 17 0 6 11 5 0 2 33 182 0 820 79 65 65 0 0 0

No No No No No KG

25

DAMAGES OCCURRED DUE TO HEAVY RAIN/ FLOOD ON 27.07.2010 TO 29.07.2010

Name of Circle Sr
19 20 21 22 23 24 25

Description
11 KV 500 MCM 5/C cable 11 KV S/C AWG Cable
Termination Kit 500 MCM cable

Unit Islamabad MTR MTR No No No No MTR MTR MTR MTR No Rawalpindi Attock

Jehl um

Chakwal

IESCO TOTAL 2715 600 8 90 25 3 1152

Amount ( Rs ) 1,508,825 894,000 24,228 700,380 476,825 2,400,000 638,856

2115 0 8 90 25 3 776

600 600 0 0 0 0 300

0 0 0 0 0 0 76

0 0 0 0 0 0 0

0 0 0 0 0 0 0

Strraight joint Kit (500 MCM) Straight joint Kit (4AWG) 4 Way switch Pvc 4/c 37/.083 cable

26
27

Pvc S/c 37/0.83 cable

PVC 4/c 19/0.083

750
1120

0
600

0
155

0
0

0
0

750
1876 95 7600

86,250
516,310 10,260 212,800

28 29

PVC 4/c 19/0.052 cable PVC 2/C 7/0.052 cable

0 1600

0 0

45 0

0 0

0 0

30
31 32 33 34 35 36

LT Kit(19/0.083)
LT Kit(37/0.083) LT conductor(7/00.122) D Shackle Assembly LT Spool Inulator Earh Rod Earth Wire

No
No MTR No No No KG

30
130 2850 52 122 60 260

0
0 0 0 0 0 0

0
0 3770 43 43 0 0

0
0 0 0 0 0 0

0
1350 0 0 0 0 0

30
130 7780 95 165 60 260

65,480
106,340 248,960 8,740 3,300 24,720 29,120

Grand Total

78,759,773 26

HOW IESCO IS CURRENTLY BEING REGULATED

IESCO

Regulators

Major Monitoring Agencies

Audits

NEPRA

Ministry (W&P)

Statutory Audit
Government Audit

SECP

Fed Board Revenue

PPRA

Auditor Gen Pakistan

Internal Audit

Transition Committee

Tax Audit FBR

27