Industry and Transaction Review
Conference
The Reductions in Aggregate Technical and NonTechnical Loss Approach to Bidding
Arif Mohiuddin
November 28, 2011
Solutions for growing economies
CPCS Transcom Limited
Outline
•
•
•
•
•
Purpose for the Disco Transactions
ATC&C Defined
Method of ATC&C Bid Evaluation
Post-Privatisation
Conclusion
Solutions for growing economies
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Purpose for the Disco Transactions
• The PHCN Successor Distribution Companies are
characterized by high levels of Technical,
Commercial and Collection Losses
• The key objectives are to
– reduce losses
– increase connectivity and access to power through
enhanced investments
– provide reliable power supply
– provide clear parameter for assessing operators
Solutions for growing economies
3
ATC&C Defined
• ATC&C is defined as the Aggregate Technical,
Commercial and Collections Loss of a
Distribution Company
• This is the difference between the amount of
electricity received by the Distribution Company
and the amount received from customers
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ATC&C Defined
Example:
 Disco Receives 100 MWh of electricity from
Transco in a particular month
 Disco Bills consumers $90 for 90MWh
 Disco Collects $80 from consumers for that
month
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ATC&C Defined
• The Aggregate Technical and Commercial
Loss is therefore:
1 – (90 MWh/100 MWh) = 0.1 or 10%
• The Collections Loss is therefore:
1- (80/90) = 0.11 or 11%
Solutions for growing economies
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ATC&C Defined
• The collection loss only occurs on the 90% of
the electricity that was billed for
• To get the ATC&C we will multiply the collection
loss by 0.9 and add it to the Aggregate technical
and commercial loss
ATC&C loss
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= 0.1 + 0.9x0.11
= 0.2
=20%
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Method of Bid Evaluation
• Bidders will Bid on the relative reduction in
losses
For Example
• If a bidder bids to reduce the loss by 10% in
year one that means
– If the present loss is 50%, the bidder would be
expect to reduce the loss to 45% (i.e. 1- (50 x .1) = 45)
Solutions for growing economies
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Method of Bid Evaluation
• Each bid will contain a proposed 5 year loss
reduction trajectory
• Bids will be evaluated based on the lowest end
level in losses for a particular distribution
company
Solutions for growing economies
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Method of Bid Evaluation
• Assume a Disco currently has an ATC& loss level
of 35%
Bidder ABC
Year
1
% Loss Reduction Committed
by Bidder by year
Projected ATC&C Loss Level
(%)
Reduction from previous
year's ATC&C level
Discounted ATC&C loss
Reduction (10% discount rate
used)
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5%
Year
2
8%
Year
3
10%
Year
4
10%
Year
5
Results
(sum)
12%
33.25% 30.59% 27.53% 24.50% 21.56%
1.75%
2.66%
3.06%
3.03%
2.94%
1.59%
2.20%
2.30%
2.07%
1.83%
9.98%
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Method of Bid EvaluationAssumed Present Loss
Bidder ABC
Experimental Case
35%
Yr 1
% Loss Reduction
Committed by Bidder by
Projected ATC&C Loss
Level (%)
Reduction from
previous year's ATC&C
Discount Rate
Discounted ATC&C loss
Reduction (10% discount
Yr 2
Yr 3
Yr 4
Yr 5
Result
5%
8%
10%
11%
12%
33.3%
30.6%
27.5%
24.5%
21.6%
1.8%
2.7%
3.1%
3.0%
2.9%
0.91
0.83
0.75
0.68
0.62
1.59%
2.20%
2.30%
2.07%
1.83%
9.98%
We expect the loss reductions during control period to be on accelerated Basis
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Post-Privatisation
The present
numbers used
to calculate the
ATC&C loss are
based on the
market
operators’ data
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A baseline
accurate loss
level will be
established
within a
reasonable
timeframe
The loss
numbers that
are proposed by
the winning
bidder will then
be incorporated
into MYTO
model
12
Post-Privatisation
• Any increased level of required investments
would need to be agreed with NERC
• As tariff is based on targeted loss,
– failure to reach the loss target level will trigger loss of
profit
– Exceeding loss target will trigger higher profit
• If bidders consistently do not meet their loss
reduction targets, NERC may further decide to
revise the capex amounts allowed for a bidder
under their tariff
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Conclusion
• FGN is determined to have successful Disco
transactions
• Further measures are being considered
– to attract credible and serious operators only
– to avoid unrealistic and unachievable loss targets
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Thank you
Questions:
phcnprivatisation@cpcstrans.com
November 28, 2011
Solutions for growing economies
CPCS Transcom Limited