Delhi Transco Limited - Unbundling of Delhi Vidyut Board (DVB)

Unbundling of Delhi Vidyut Board (DVB)

The power situation in Delhi till a few year ago was yet another example of man’s incapacity to handle another form of energy. The Delhi Vidyut Board (DVB) was a State Electricity Board set up in 1997 under the Electricity (Supply) Act, 1948, succeeding the Delhi Electricity Supply Undertaking (DESU) which has existed since 1957 as a wing of the Municipal Corporation of Delhi. It was an integrated utility with generation, transmission and distribution functions serving all of Delhi except the NDMC and MES (Cantoment) areas to which it supplied power in bulk.

The creation of DVB, replacing DESU, is 1997 proved to be merely a change in the legal status of the organization and was not followed by any real change in its structure, functioning and work culture. Its reputation continued to deteriorate and its poor commercial performance, the best known thing about DVB perhaps being its high Transmission and Distribution (T&D) losses made it a drain on the public exchequer. Further, failure in raising the resources necessary for improvement of its services made matters critical. There were unprecedented, widespread expressions of public discontent during the difficult summer of 1998.

In December 1998 when the present Government came to power in Delhi, the power situation was grim to say the least. With T & D losses as high as 50% regular power cute for 10 to 15 hours and Delhi Vidyut Board accumulating liabilities of over Rs. 23,000 crores, Delhi Government had to come up with a fast and viable alternative. An alternative that would not only meet people’s aspirations in terms of its end result but also be interesting enough for investors. And thus began a step by step process of a never-before fundamental power reform.

Delhi Electricity Board Regulatory Commission (DERC) was constituted in May 1999 whose prime responsibility was to look into the entire gamut of existing activity and search for various ways of power sector reforms. The DERC is even today a fully functional body which has since issued tariff orders for annual revenue requirement. Delhi Electricity Reform Ordinance, 2000 was a body which was promulgated in October 2000 and notified in the form of an Act in March 2001. It mainly provides for the constitution of an Electricity Regulatory Commission, unbundling of DVB into separate generation, transmission and distribution companies and increasing avenues for participation of private sector.

This was followed with a Tripartite Agreement which was signed by the Government of Delhi, DVB employees to ensure the cooperation of stakeholders in this reform process. The tripartite agreement sent off very positive vibes to the people in general as well as to the investor community about the sincere and hassle-free objectives of power reforms.

Next, a two stage competitive bidding process of Request for Qualification (RFQ) and Request for Proposal (RFP) was set into motion for privatization of the distribution companies.

The bidders were selected on the basis of reduction of total Aggregate Technical and Commercial of losses (AT & C) a unique feature of the power sector reforms in Delhi. The bidders were required to bid on the basis of efficiency improvement like reduction of AT & C losses that they achieve year wise over a period of five years.