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Power Sector Reform and Restructuring in Nagaland

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Power Sector Reform and Restructuring in Nagaland Power Sector Reform and Restructuring in Nagaland International Management Institute B-10, Qutab Institutional Area Tara Crescent, New Delhi – 110 016 Power Sector Reform and Restructuring in Nagaland Final Report March 2006 International Management Institute B-10, Qutab Institutional Area Tara Crescent, New Delhi – 110 016 CONTENTS LIST OF ACRONYMS ....................................................................................................................................................... i SUMMARY OF RECOMMENDATIONS.......................................................................................................................... iv 1. INTRODUCTION .......................................................................................................................................................... 1 1.1 Background ............................................................................................................................................. 1 1.2 The Present Study................................................................................................................................... 1 1.3 Organisation of the Study ...................................................................................................................... 3 2. THE STATE OF NAGALAND....................................................................................................................................... 4 2.1 Socio-Economic Background................................................................................................................ 4 2.2 Communitization..................................................................................................................................... 5 2.3 State Finances......................................................................................................................................... 6 3. REVIEW OF THE STATE POWER SECTOR .............................................................................................................. 9 3.1 Demand for Power .................................................................................................................................. 9 3.2 Installed Capacity.................................................................................................................................. 12 3.3 Power Purchase .................................................................................................................................... 15 3.4 Power Systems...................................................................................................................................... 17 3.5 Aggregate Technical & Commercial Losses ...................................................................................... 20 3.6 Financial Losses ................................................................................................................................... 23 3.7 Reform Initiatives.................................................................................................................................. 26 4. PERSPECTIVE POWER PLAN ................................................................................................................................. 27 4.1 Demand for Power Based on Historical Trend................................................................................... 27 4.2 Assessment of Additional Load........................................................................................................... 27 4.3 Demand Forecast (Simulation) ............................................................................................................ 30 4.4 Recommendations................................................................................................................................32 5. COMMUNITISATION – NAGA WAY OF REFORMS................................................................................................. 35 5.1 Implementation of SPM in Villages...................................................................................................... 35 5.2 Extension of SPM to Urban Areas ....................................................................................................... 37 5.3 Legal and Economic Issues................................................................................................................. 38 5.4 Recommendations................................................................................................................................40 6. ROAD MAP FOR REFORM AND RESTRUCTURING .............................................................................................. 42 6.1 Reforms in Other States....................................................................................................................... 42 6.2 Need for Creating Corporate Structure............................................................................................... 43 6.3 Alternative Models for Corporatisation............................................................................................... 44 6.4 Recommendations................................................................................................................................46 7. STU AND FINANCIAL RESTRUCTURING PLAN..................................................................................................... 48 7.1 Role and Functions of the STU............................................................................................................ 48 7.2 Existing Structure of Transmission Divisions.................................................................................... 49 7.3 Recommendations................................................................................................................................50 8. NPDSCL AND FINANCIAL RESTRUCTURING PLAN ............................................................................................. 59 8.1 Power Development and Supply Corporation.................................................................................... 59 8.2 Valuation of Assets............................................................................................................................... 63 8.3 Recommended FRP and Financial Projections.................................................................................. 64 8.4 Transfer Scheme................................................................................................................................... 67 9. REGULATORY FRAMEWORK.................................................................................................................................. 71 9.1 Emerging Regulatory Regime.............................................................................................................. 71 9.2 Communitisation Act and Rules.......................................................................................................... 71 9.3 Establishment of the SERC.................................................................................................................. 72 10. SOME MORE ISSUES AND RECOMMENDATIONS .............................................................................................. 79 10.1 Communication Strategy...................................................................................................................... 79 10.2 Revenue Management .......................................................................................................................... 85 10.3 Accounting System............................................................................................................................... 88 LIST OF TABLES Table 2.1: Fiscal Indicators............................................................................................................................................ 7 Table 3.1: Energy Requirement and Peak Load Forecast by CEA ........................................................................... 11 Table 3.2: Installed Generating Capacity.................................................................................................................... 12 Table 3.3: Generation Cost of Likimro Hydro Project................................................................................................ 13 Table 3.4: Existing Power Systems............................................................................................................................. 18 Table 3.5: Status of DT Metering (2004-05)................................................................................................................. 19 Table 3.6: Progress in 11 KV Feeders Metering (2004-05) ........................................................................................ 20 Table 3.7: Unit Costs and Revenue Gap (2004-05)..................................................................................................... 24 Table 3.8: Securitization of Power Purchase Dues.................................................................................................... 26 Table 4.1: Demand Forecasts Based on Historical Trend......................................................................................... 28 Table 4.2: Estimated Additional Demand for Power.................................................................................................. 29 Table 4.3: Demand Forecast Based on Simulation Model .......................................................................................
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