Energy Policy Of UP Government

  1. Since independence the State's power sector has grown at a rapid rate, contributing to the development of agricultural and industrial sectors in the state. The installed capacity available to the State has increased from about 264 MW in 1959 to about 5,886 MW in 1998. The transmission network has increased fifty-three folds during this period. The UPSEB today serves about seven million legitimate consumers, but there are many more who are not yet on the ledgers of UPSEB. During this period per capita power consumption has increased from 58 KWH to over 204 KWH (1994-95). As against this, the per capita consumption in States like AP, MP, Gujrat, Maharashtra the net average of the States, 319 KWH have been achieved during 1994-95.
  2. The power sector has not been able to keep pace with the increase in power demand in the State. As against connected load of 13954 MW the installed capacity is only 5886 MW (8600 MW including the share in the Central sector units). Uttar Pradesh in currently facing an acute power shortage. Inspite of Energy Supply Managment, UP has a peak demand deficit of about of 15% while its energy shortage is about 8 percent. The power sector is faced with problems of low plant load factor in its thermal power stations (about 49%) very high transmission and distribution losses including non-technical losses, low voltage and frequent interruption. This has resulted in an adverse impact on the development and economy of the State and the welfare of the people. The State Government is very concerned about the continuing power shortage and the frequent power cuts imposed on electricity customers.
  3. The root cause of the declining performance of the power sector is the lack of adequate investments to meet the sector's capital requirments and the deterioration in sector's efficiency. The primary reason for the lack of investment is the critical financial situation of UPSEB. As on 31st March, 1997, the accumulated commercial losses of UPSEB, excluding the State subsidies, were of the order of Rs. 7000 Crores, and cash liabilities of the order of Rs. 4200 Crores. UPSEB has not been able to meet its operational cash requirements because of high losses, poor Bill collections and unremunerative tariff for some category of consumers resulting in poor creditworthiness. The power sector has not been able to mobilise the resources required to finance the development activities. The continuing cash shortfall has also resulted in inefficient operations and in inadequate maintenance of the existing system. The State's Budgetary resources are extensively used to support the operations of the power sector, which could alternatively have been used for other social development activities.
  4. As per the studies carried out, the State will need about 14,500 MW of additional generation capacity by the year 2011 to meet its power demand. Substantial investments will be required in transmission and distribution to supply this additional power and distribution to supply this additional power and rehabilitate the existing transmission and distribution system so as to reduce system losses and improve quality of power supply. The estimated investment required in the power sector e.g. for generation, transmission and distribution, by the year 2011 is about Rs. 69,000 crores. These huge requirements cannot be met without a massive mobilisation of resources, restoration of the creditworthiness of the power utilities, and the establishment of  a proper enabling environment. The State Government is determined to overcome the prevailing problems in the power sector and has decided to restructure & reform its power sector with ultimate aim of privatisation of generation and distribution areas.
  5. The goal of the Uttar Pradesh Power Sector Reform programme is to:
    • Provide cost efficient good quality electricity to all categories of consumers for economic development/social uplift of the State.
    • Make the energy sector commercially viable so that it ceases to be burden on the state budget; and
    • Protect the investment of the consumers.
  6. Keeping in view the above mentioned goals, the Government of Uttar Pradesh has agreed on the following key aspects of the Power Sector Reform Programme:
    • Restructing of Uttar Pradesh State Electricity Board (UPSEB) into autonomous and separately accountable entities.
    • Creation of an Independent Regulatory Body to protect consumers as well as long term financial health of the Power Sector.
    • Ultimate transfer of ownership of the assets to public corporate entities over a phased time schedule.
    • Rationalization of tariff.
  7. Reforms-Phase I (Corporation): With the increasing volume of activities and specialisation in the field of Generation, Transmission and Distribution and with a view to improve the performance of these sectors, it has become essential to run them as separate profit centres. These profit centres would subsequently be corporatised by establishing following entities:
    • Thermal Generation Corporation;
    • Hydro Generation Corporation.
    • Transmission and Distribution Corporation
    As a further step to make these entities more responsive to the customers and to provide better service, the process of involving private entrepreneurs in the distribution of Electricity has already been started. The Greater NOIDA Area has been privatised. It is envisaged that the distribution works of Moradabad, Kanpur (KESA) and Agra zones will be handed over to privatise company through the competitive bidding route in the begining of the reform process. This aspect too will be finalised after requisite study.
  8. Restructuring in the Third & subsequent Phases :
    • Generation corporations (Thermal and Hydro) will be horizontally divided into smaller generating companies (power station wise). The criteria would be that each compnay functions as an independent economically viable corporate entity. In the last phase e.g. privatisation phase, these companies will be privatised through competitive bidding.
    • separate corprations for transmission and distribution would be created.
    • In the next phase, transmission corporation will be divided into two separate companies on the basis of the functions namely:
    • Gridco to own and manage the grid assets.
    • UP Power Corporation to manage the system coordination and market making function.
    • In the last phase the distribution corporation will be further divided into smaller distribution companies. These companies ultimately will be privatised within a period of 6 to 8 years. The sequence and phasing of the activities outlined above may very depending upon consultancy inputs and prevailing circumtances.
  9. The draft Uttar Pradesh Electricity reform Bill has prepared and will be placed before the State Assembly. Meanwhile, the Government of Uttar Pradesh has decided to create an Independent regulatory Body to Protect the interests of all categories of consumers and power utilities in the State. The Government is closely watching the reform activites in Orrisa, Haryana, Rajasthan,Andhra Pradesh and other States as well as the steps taken by Central Government in this regard. The Govt. of UP has decided to establish UP Electricity Regulatory Commission under the provisions of the Electricity Regulatory Commission Act, 1998.
  10. The main functions of the Commission will be to :
    • Regulate the purchase, distribution, supply and utilization of electricity, the quality of service, the tariff and the charges payable keeping in view the interests of the consumers as well as the electricity companies.
    • Issue license for power transmission and distribution in the State;
    • Regulate the working of licenses and to promote their working in an efficient, economical and equitable manner;
    • Promote efficiency, economy and safety in the use electricity in the State with particular regard to quality, continuity and reliability of service to the consumer.
    • Promote completion and encourage the participation of the private sector while ensuring fair deal to the consumers.
    • To encourage uniform code of conduct and standards for the electricity industry.
    • Require licenses to formulate prospective plans and schemes for the promotion of generation, transmission, distribution and supply of electricity. Aid and advice the State Government in matters concerning electricity Generation transmission, distribution and supply in the state and.
    • Act as arbitrator or adjudicator to settle disputes arising between the licenses.
  11. The Government of Uttar Pradesh has already decided to entrust all new generation projects to the private sector, Several Power Purchase Agreements (PPAS) have already been signed with Independent Power Producers (IPPS) for Thermal, Hydro and small Hydro Projects, namely.
    • Thermal -Jawaharpur and Rosa Thermal Projects.
    • Hydro-Vishnuprayag Hydro Electric Project, Srinagar Power Project.
    • Small Hydro Projects - Bhilangana, Bhyundar Ganga, Pulna, Melkhet, Madkini, Rupin and Rishi Ganga Projects. In addition to the above, several PPAS for some more projects including liquid based fuel and cogeneration plants are under process of finalization.
  12. As a general policy, the Government of Uttar Pradesh considers that retail tariffs should be rationalised. A definite formula has to be devised to determine the extent of cross subsidisation, direct subvention by the Government and the extent to which both of these can be reduced over a period of time. The regulatory Body proposed to be constituted will set tariffs to allow cost recovery. The retail tariff has already been revised from January, 1997 with the an average increase of about 20%. The Government is committed to further revise the tariff in phases to cover the operationg expenditures.
  13. In the process of restructuring, no staff will be retrenched and service conditions of present staff shall be fully protected as and when they are transferred to successor companies, for which necessary legal frame work has already been provided in the draft Reform Bill.
  14. The implementation of the reform programme has already started. The Government of Uttar Pradesh has established following organisations to manage and implement the Power Sector Reform in UP.
    • A Steering Committee with the Chief Secretary as Chairman, to provide overall guidance and ensure that decisions on policy matters are taken expenditiously.
    • An Implementation Task Force with the Secretary in charge of Energy Department as Chairman, to manage reform process.
    • A reform Action Group (RAG) headed by a Director of Chief Engineering (UPSEB) rank, for providing day to day support to the Implementation Task Force.
  15. Government of Uttar Pradesh is committed to reform the power Sector in the State. It has already set-up Uttar Pradesh Electricity Regulatory Commission under provisions of the Central Act and notification has already been issued and also taken several measures to accomplish this task. The passage of the Uttar Pradesh Electricity reform Bill shall put in place the remaining gaps in legislative framework. The institutional changes required to implement the reform process are under active consideration and will be implemented in a phased manner. With a clear commitment to the people of Uttar Pradesh to provide quality power, efficiently and at reasonable rates, the State Government looks forward to working in close collaboration with all the stakeholders i.e. power sector employees, consumers financial institutions and civic society.
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