Zeljko Markovic, Deputy Director of the Electricity Distribution Department at EPS, We have a chance to improve our performance10. June 2013. / Uncategorized
With this year’s collection rate of 102% and the reduction of electric power losses to 14.45%, EPS would be able to realize substantial cost savings and increase revenues. − We need an adequate support of judicial authorities and much greater engagement of distribution companies.
Collection of debts for delivered electricity and minimization of distribution losses, i.e. their reduction to the level imposed by technical conditions are two resources that, along with an adequate price of electricity, constitute the very foundation of the performance pyramid in each company with the same structure and scope of activities as “Electric Power Industry of Serbia”. Hence, the price of electricity, billing and losses are seen as the elements which could most contribute in achieving the objectives of business strategy, both at the level of PE EPS and its subsidiary companies. In the interview with Zeljko Markovic, MSc, Deputy Director of the Electricity distribution department at EPS we discussed the topics of bill collection and loss reduction because, for most customers in Serbia, the electricity price is still a regulated category, controlled by regulatory bodies and government authorities.
Accountability and interdependence
− Collection of receivables and reduction of losses are two mutually conditioned and inseparable activities in distribution. More precisely, collection realization which is less than invoiced realization generates losses, if not directly, than indirectly. The practice that customers who had their electricity cut off decide for themselves to re-connect to the grid, creates an impression that everyone can connect whenever they want, although most of disconnected customers connect to the grid through electricity meters, which means that distribution company can actually read their consumption. However, such indiscipline leads to a rising presence of electricity theft, the issue that has been causing distribution companies a lot of trouble for decades – said Markovic and stressed that poor collection, in fact, goes hand in hand with large commercial losses in electricity distribution.
He recalled that, at the beginning of the year, the Electricity Distribution Department of EPS adopted an Action plan for loss reduction, which is, basically, the sum of measures contained in the plans of distribution companies. According to this Action plan, in comparison to the last year’s level amounting to 15.16%, electricity losses should be reduced to 14.45% by the end of 2013.
– With such a reduction in losses, EPS would manage to save RSD 1.27 billion in this year. And that’s not all. If losses fell by only half a percent more than targeted level, i.e. be reduced to 13.95%, we would have an extra saving of RSD 2.2 billion. In sum, if we managed to reduce distribution losses to 13.95% on all amount of electricity overtaken by the system, EPS would save RSD 3.47 billion, calculated on the basis of an average electricity price of 6 euro cents per kWh – explained Markovic.
We’ve recalled that action plans for loss reduction were passed in previous years as well, and that they recorded good results only at the beginning of the implementation, almost an entire decade ago, while afterwards there has been a decline in performance, which has remained poor and variable until the present time. Markovic replies that the situation has become more apparent with the enforcement of the new Energy Law and introduction of network fee, i.e. the fees for the use of the distribution system. The distribution companies will continue to pay taxes on losses above the accepted level, but both companies and management teams will have to assume responsibility for “unauthorized” losses.
– For now, the Electricity Distribution Department of EPS hasn’t any instrument to question the responsibility for the failure to meet targeted goals and tasks. We can only define a plan, in cooperation with the individual companies, and remind and encourage them to achieve appropriate results. The scope of authority of EPS’s departments is thus very limited. But things will change with the corporatization of EPS group, which implies clearly defined competencies and responsibilities. However, even in these conditions, it is realistic to expect that all companies will make an effort to reduce losses, because this is the only path, in addition to better collection rate, that would lead them to positive business results – said Markovic.
Recalling that the implementation of the measures envisaged by the Action plan for loss reduction will require an adequate support of judicial authorities, which by means of a uniform jurisprudence and efficiency will help prevent electricity theft, our interlocutor added that each distribution company should establish a system of clearly defined and demarcated responsibilities that will take into account the failures in performing tasks, as well as the successful performance which should be rewarded. Moreover, he drew attention to the fact that losses do not incur only because of electricity theft, obsolete measuring devices or absence of meter reading. According to him, in addition to unavoidable technical losses, there are also electricity losses incurred as a result of an inadequate network planning, overloads of individual lines or substations, on the one hand, and of insufficient exploitation of certain facilities of parts of a network, on the other. As a consequence of the aforementioned, the aggregate losses of EPS account for more than 4 billion kWh per year.
Goal: Achieving more than planned
In contrast to the variability typical of energy losses, a trend recorded in the collection rate has been quite positive over the last couple of years, especially in the last two years when the results surpassed targets. Mr. Markovic says that this already established practice will exactly be the basis for the development of an operational plan aimed at enhancing the collection rate, with the ultimate goal of achieving a collection rate of 102% in 2013, even though the Business Plan for 2013 foresees a collection rate of 96%.
– The reason for opting for such a high target is that some distribution companies have recorded above-average results and that the upward trend in performance will certainly continue. Poor performers will have to put more effort into achieving this year’s collection targets. This means that they have to systematically and persistently warn their debtors, as well as to apply all legal measures of enforced collection, including electricity cut off and filling a lawsuit against debtor – said Markovic.
He recalled that in the past two months the debtors had the opportunity to repay their debt from 2012 in installments, as well as that that interest on the debt was written off. Also, the implementation of the Decree on vulnerable customer adopted by the Ministry of Energy has also started, which means that socially vulnerable categories of consumers will receive, on a monthly level, a certain amount of electricity free of charge. Thereby, the distribution companies from now on don’t need to hesitate when deciding whether or not to cut off electricity to someone who is in a bad financial situation. All the others, including the protected groups if their consumption exceeds the incentives, will have to regularly pay their bills. Our interlocutor also emphasized that the action of electricity cut offs sanctioning large debtors, which has begun in May, will not be short-term, but permanent.
– Unfortunately, most of the debtors did not take advantage of a two-month campaign “Pay in installments, with zero interest!” because only RSD 8.5 billion of debt was rescheduled or, to be more precise, a quarter of the whole debt. However, we can be satisfied with this result because the purchasing power of the citizens has declined. Moreover, the fact is that some distribution companies failed to inform their customers about this benefit in a timely manner, as well as to encourage them to capitalize on it. The most engaged ones achieved the best results. Hence, we expect that high collection targets for this year will motivate all distribution companies to increase their commitment to the achievement of this goal – said Markovic.
Experience in controlling
As a reply to our remark that the effects of the measures implemented in order to reduce electricity losses (such as, for example, setting up measuring equipment at transformer field) have not been systematically followed up, Markovic said that in the plant which he headed until recently, i.e. EDB’s plant in Krnjaca, they made a detailed analysis of how measurements on transformer field contribute to the control of consumption. He summarized the results of that analysis, conducted in the winter 2002/2003, in the conference paper written together with his colleague Jelena Stevic, which showed that the losses at low voltage level are the largest in January, the coldest month of the year.
– A detailed inspection of measuring points was performed on eight selected transformer substations which recorded big losses – i.e. on the same day for all electricity meters at a particular field. The control is performed by three combined teams coming from three operating units. Those TSSs supplied a total of 1,415 consumers, or 5.7% of the total number of consumers in the consumption area of “Krnjaca” plant. Irregularities were detected in 4.31% of observed consumers. There were 22 cases of electricity thefts (1.55% of consumers), of which 10 thefts on the main line and 12 on electricity meters. Base on these results, we planned the follow up activities and directed them to certain areas and customers – said Markovic, adding that, unfortunately, this was the only detailed analysis related to the effects of setting up measuring equipment at transformer field performed in EPS.
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