Franchisee Models

Model A : Revenue Franchisee- collection based

This kind of franchisee may be developed with the intended role limited to billing, revenue collection, complaints redressal, facilitating release of new service connection and keeping vigil on the status of distribution network in the franchised area for providing appropriate feedback to the utility.

Such Collection Franchisee would be appointed for an area and be given a target for revenue collection every month which depends on the baseline collection in the area.

The remuneration methodology involves:

• paying the franchisee margins (which will be a percentage of collections) on achievement of the target,

• levy of penalty for not achieving the target

• Incentives for exceeding the target.

Drawback of this system is that the franchisee is not a partner in loss reduction since its compensation is linked to the revenue collections made and not on the energy input coming into the area. This model is thus not preferred for adoption.

Model B : Revenue Franchisee Input based

In case of the input based franchisee, the input energy into the area covered by the franchisee is measured by the utility and the target for revenue collection are set based on the collections made as a percentage of the input energy supplied to the consumers beyond the point of metering by the utility.

The operations and remuneration methodology of the input based franchisee is similar to that of the collection franchisee.The basic difference is in the target setting mechanism by the utility.

The input based franchisees area may be decided based on:

• Energy supplied by the utility through 11 kV feeder(s) as a point / location of measurement of energy supplied to franchisee and will need a metering unit in the individual 11 kV feeders.

• Above system can also be distribution transformer wise located in the villages having smaller area of franchisee operation.

The additional advantage of this method as compared to that of the collection franchisees is that the franchisee also becomes a partner in loss reduction and tries to reduce theft in the system.

Model C : Input based Franchisee

This model is similar to the Revenue Based Model with one significant difference that the franchisee will also buy the electricity from the utility and shall pay the energy charges to the utility at a pre-determined rate.The energy supplied / purchased will be as shown in the 11 kV metering unit. The franchisee will have to collect revenues from the consumers through raising bills so as to have sustainable commercial operation.

Model D : Operation & Maintenance Franchisee

In this model, in addition to the franchisee operation indicated in model C above,the Utility may also hand over the operation and maintenance of 11 kV & LT feeders including distribution transformers to the franchisee based on monthly retainer basis or at an adjusted energy purchase price (of the utility), factored appropriately considering O & M cost of the franchisee.

Model E : Rural Electric Co-operative Societies

This approach calls for the State to authorize the creation of traditional electric cooperative society that is organized, owned and operated by its members. The society owns the distribution utility assets and is responsible for all utility functions including operations and maintenance, metering, billing and collections, accounting and finance, procurement, stores and system planning and expansion.

The operations of the co-operative society involve:

• Organizes the community and recruits membership.

• Owns the distribution system and carries any debt on the assets.

• Is responsible for all facets of managing and operating the utility.

• Purchases power from the state power utility.

The society is formed through memorandum of association (MOA) and has the following key features:

• every household within the jurisdictional area of the society is member of the co-operative society,

• at the helm of the management is the Board of Directors elected by the members of the co-operative society (one member one vote),

• net profit of the co-operative are to be shared amongst the members,

• Co-operatives are the licensee.

Model F : Electric cooperative society operations management through contracting

This is a variant of the above model - E, keeping the formation procedure of the society unaltered. The BOD of the society may decide to run the operations of the society through an external experienced agency / organization with suitable fee structure, instead of operating the system itself with the concurrence of the state / utility. This can be achieved through an appropriate operations contract with built-in performance criteria.

Deployment of efficient operation contractor ( or managing agency / organization) may considerably help proper day to day operations of the electric co-operative society.