Measuring and managing power sector reforms

Power sector reforms have been very much in the news, and given the precarious state of our power supply industry, the urgency of specific measures is now dawning on the leadership of political parties across the horizon. At a recent meeting of chief ministers, several actions were identified including the implementation of an effective management information system and elimination of power thefts in the next two years. Full metering of all consumers was targeted for completion by December 2001. Full metering is an essential element of any process of reforms to be implemented, but the danger is that in the desire to carry out this task by the year December 2001, we may actually install meters for all consumers but with questionable benefits. There are two issues that need to be considered in meeting the target of 100 per cent metering by December 2001. Firstly, what would we do with meters? Ideally, payment for power should be on the basis of measurement of actual consumption, even if the rates are subsidised and below cost as is currently the case. And for proper management of distribution, proper measurement is clearly a critical prerequisite. But this must be accompanied by a change in tariffs, so that payments are made on the basis of metered supply. Can we really bring this about by December of this year? The second critical issue relates to the technology of metering. For many years now several seminars and discussions have been held on time-of-use metering, whereby not only is consumption measured but the time at which power is consumed is also recorded. In a country where the most severe problem lies in relation to shortages of peak load capacity, it is important to introduce time of day pricing, because there are certain applications of electricity use, where shifting consumption to off-peak periods may be feasible. In such cases, charging a higher tariff during periods of peak demand can result in significant shifts in consumption. This is typically the case with several industrial processes, say, for instance, a heat treatment furnace functioning at night during off peak hours using electricity at lower prices rather than during peak hours when prices should be set higher. This would also be the case with domestic applications. For instance, if there was a higher tariff during periods of peak demand, most consumers would be quite happy to switch on electric geysers at 6:00 a.m. rather than 9:00 a.m. and in the afternoon rather than in the evening. In the aggregate this could shift consumption from peak hours to off peak hours at a significant level. But, for this metering would have to be based on time of use. Such meters are manufactured and used in several countries. By far the most interesting and important innovation in meter technology that has taken place in recent years is in the use of prepayment meters. The South African utility Eskom, for instance, has gone in for pre-payment meters on a large-scale in their effort to connect new customers in poor communities. Typically, pre-payment requires the purchase of tokens or electronic cards, similar to telephone calling cards, and these are inserted in the meter, before electricity is consumed. Once the amount for which the token or card has been used up, power supply would stop till a new pre-payment is made. This technology does not, of course, eliminate theft of power directly from the distribution system using illegal connections, but it certainly eliminates large-scale tampering of meters and ensures that there is no default in payment for power consumed. Life cycle costing studies have shown Eskom that pre-payment is a far more cost effective system than the current billing system used conventionally. The use of pre-payment meters has been tried successfully on a significant scale in Argentina as well, where prepayment systems have proved useful in supply of power to co-operatives, which are responsible for distribution of electricity in several communities in Argentina. It is then left for the co-operatives to collect payment from their members, but the electric utility itself does not remain responsible for direct collection of dues. Needless to say the cost of pre-payment meters is much higher than conventional meters, but once we account for the cost of meter reading, collection, delayed payment, etc. prepayment meters have a clear advantage in many communities. In the context of power reforms, the important point to consider is that in bringing about change and meeting a quantitative target, it would be shortsighted to ignore matching changes in management systems and upgradation of technology. Hence, there may actually be a strong case for a deliberate delay, so that metering of power consumption in India through improved meter technology is not lost in our haste for a ritual 100 per cent target being met.