CESC Limited ('CESC' or 'the Company), is the flagship company of the RP-Sanjiv GoenkaGroup (the 'Group'). Registered in 1897, it is a fully integrated power utility engaged inthe generation and distribution of electricity across 567 square kilometres of licensedarea in Kolkata and Howrah, West Bengal. It supplies safe, cost- effective and reliableelectricity to over 2.9 million customers - to both consumer households and commercialestablishments.
Apart from spearheading the Group's interest in the power sector, the Company, throughits subsidiaries, is also active in the organised retail, business process management andinfrastructure sectors as a part of its strategy for diversification and long-term growth.
This chapter presents an overview of the energy sector as well as details ofoperational and financial performance of the Company. It also discusses importantinitiatives taken by CESC and its subsidiaries during the year to achieve its growth andperformance objectives.
Global Energy Outlook
The structural changes in the global energy scenario in the last few years are nowhaving a major impact on the demand-supply dynamics. On the supply side, the resurgence inoil and gas production in the US has made it one of the world's largest producers. As faras demand for energy is concerned, emerging economies are expected to drive the globalmarkets.
According to the World Energy Outlook 2014, world primary energy demand under the 'NewPolicies Scenario'1 will grow by around 4,932 million tonnes of oil equivalent(Mtoe) between 2012 and 2040 - a CAGR of 1.1% (Chart A). As expected, the demand in non-OECD countries will grow much faster, and will account for 93.5% of this increase inenergy demand.
More important, over 45% of this increase will come from China and India, as theywitness a surge in energy demand during this period from 3,697 Mtoe in 2012 to 5,942 Mtoein 2040 (Chart B). As a result, these two countries will account for 32.5% of globalenergy demand in 2040, up from 13.6% in 1990 and 27.7% in 2012. This will make China, USand India the top three consumers of energy in the world by 2040, with a share of 23%, 12%and 10% respectively.
Fossil fuels - coal, oil and gas - are the dominant sources of energy, meeting around81.7% of energy demand (Chart C). As far as the long-term trends in fuel sources areconcerned, as nuclear faces an uncertain future, there have been encouraging improvementsin efficiency and in continuous efforts to innovate and reduce the cost of emerging energytechnologies, such as solar photovoltaics (PV). As shown in Chart C, share of renewablesources is expected to increase-from 13.5% in 2012 to 18.9% in 2040. During the sameperiod, even as the dominance of fossil fuels is expected to continue, its share isestimated to come down to around 74.5%. More important, this decline is only due to thedrop in share of coal and oil in the energy mix, as the share of gas is expected toincrease between 2012 and 2040.
The power sector accounts for 38.1% of the global energy demand in 2012; and over 53%of the increase in such demand between 2012 and 2040 is expected to come from this sector.Accordingly, capacity addition of 5,033 GW is estimated between 2012 and 2040.OECDcountries account for one-third of capacity additions due to retirements and move todecarbonise. Move to renewable sources will also gather steam in other regions, especiallywith availability of efficient and cost effective technologies. As a result, renewablesources are expected to account for 59% of all capacity additions between 2012 and 2040.
The 'New Policies Scenario' estimates take into account broad policy commitmentsand plans that have been announced by countries around the world to cut down on emissions,even if they are yet to be formally adopted and implemented.
This will mean significant change in the fuel mix for the power sector, more so thanthe overall global energy mix. As shown in Chart D, even as the dominance offossil fuelsis expected to continue, hydro and other renewable sources (mainly wind, solar, bioenergyand geothermal) combined will account for 32% of the total power generation by 2040.
Overall, it is quite clear that even as coal continues to be the primary fuel for thegeneration of power, renewable sources will be the biggest beneficiary in the medium tolonger term. To that extent, securing supplies of coal and building technologycapabilities in the use of renewable sources of energy will continue to dominate theglobal energy agenda in the future.
India's Power Scenario
During 2014-15, Indian power sector added 24.6 GW, which was in line with the targetsset for the year. The addition of transmission and distribution infrastructure was alsosatisfactory. With these capacity additions, generation capacity in India stood at 268 GWat the end of the year. Table 1 gives the details.
Table 1 : Power Generation Capacity in India : 2014-15, By Fuel Source
|Fuel ||MW ||% Share ||Growth (%) |
|Coal ||164,636 ||61.5% ||13.3% |
|Gas ||23,062 ||8.6% ||5.9% |
|Diesel ||1,200 ||0.4% ||0.0% |
|Thermal ||188,898 ||70.6% ||12.3% |
|Nuclear ||5,780 ||2.2% ||20.9% |
|Hydro ||41,267 ||15.4% ||1.8% |
|Others ||31,692 ||11.8% ||7.6% |
|Total ||267,637 ||100.0% ||10.1% |
Source: Central Electricity Authority
Given that coal accounts for 61.5% of the total generation capacity in India, thebigger worry for the power sector in recent times has been availability of coal, not justfor the new projects, but also for existing plants. During the year, there were positivedevelopments on this front. First, the uncertainty due to cancellation of 204 coal blocksby the Honourable Supreme Court was resolved after reallocation of some of the cancelledmines through the e-auction route. Second, domestic production of coal increased, and theGovernment of India is taking major steps to double the domestic production of coal to 10billion tonnes by 2020.
Even with recent addition of capacities, the shortfall in generation and transmissioncapacities is far from over. During 2014-15, the all- India peak demand for power was 148GW of power, whereas the actual power met was 141 GW - a shortfall of 4.7% (see Table 2).
Table 2 : Power Demand and Deficit: 2014-15
|Region ||Peak Demand (MW) ||Peak Met (MW) ||Deficit ||Deficit % |
|Northern ||51,977 ||47,642 ||-4,335 ||-8.3% |
|Western ||44,166 ||43,145 ||-1,021 ||-2.3% |
|Southern ||39,094 ||37,047 ||-2,047 ||-5.2% |
|Eastern ||17,040 ||16,932 ||-108 ||-0.6% |
|North-Eastern ||2,528 ||2,202 ||-326 ||-12.9% |
|All India ||148,166 ||141,160 ||-7,006 ||-4.7% |
Sources: Central Electricity Authority
The north-eastern and northern regions were the worst affected in terms of poweravailability, followed by the southern region. What is more important to note is that thedeficit reflected at the region level is due to exceptionally poor situation in somestates. For instance, J&K, UP and Punjab in the Northern region had deficit of 20%,17% and 13% respectively; Telengana in the Southern region had a deficit of 14%; in theNorth-Eastern region, Tripura had a deficit of 14% and Assam of 13%.
By 2016-17, demand for power is expected to increase to 1,403 billion units2- up from 1,069 billion units2 in 2013-14. This assumes energy conservation anddemand-supply measures, without which demand is expected to be even higher. Accordingly,the Twelfth Five Year Plan (2012-2017) estimates an additional capacity requirement of88.5 GW, 53% of which is expected to come from the private sector - up from 19% in theEleventh Five Year Plan. This will also need to be complemented with adequate transmissionand distribution capacities.
Although private sector investments in generation has brought about fresh capacities,the industry is facing considerable risks in terms of cost and security offuel supply aswell as high borrowing costs. The sluggishness in demand has made things worse. Part ofthis is also because several distribution utilities have been making losses, which hasresulted in scaling down of their purchases and investments in building T&Dinfrastructure for the future. To turn things around, there is a need to address theseconcerns. Also, greater focus needs to be accorded to renewable sources offuel such ashydro, solar and wind. Currently, only 2,700 MW out of a total solar potential of 300,000MW, and 21,000 MW out of a total wind potential is installed. Harnessing this potential iscritical to have a balanced portfolio of generation capacities in the longer term.
Source : Twelfth Plan (2012-2017) Document, Planning Commission
CESC's existing operations in the power sector comprise generation and distribution ofelectricity to its 2.9 million customers across its licensed areas in Kolkata and Howrah,West Bengal. For its existing operations in Kolkata, the demand for power is quitevariable, with the Company registering a peak period demand higher than 2,000 MW and alean period demand as low as below 450 MW. During peak demand period, in addition to itsown generation, CESC also purchases power from the state and national power grid.Conversely, during the lean period, it exports surplus power, when possible.
One of the key achievements of CESC as an integrated power utility has been its abilityto provide its customers with reliable and uninterrupted power supply. This has been madepossible due to relentless efforts encompassing all aspects of the business - be itgeneration, demand-supply management or distribution. These are discussed in greaterdetail in the subsequent sections on 'Generation' and 'Distribution'.
Since 2002, a part of CESC's coal requirement is met from Sarisatoli coal mine nearAsansol in West Bengal, allocated by the Ministry of Coal, Government of India in 1994.However, this allocation was cancelled by the Honourable Supreme Court of India along withall other coal blocks allocated by the Government since 1993 through the ScreeningCommittee route. The judgement, nonetheless, allowed CESC to source coal from theSarisatoli coal mine upto 31 March 2015. We are happy to report that CESC has sincesecured Sarisatoli coal mine again through an e-auction conducted by Ministry of Coal,which entitled it to use the coal from that mine for power stations of CESC or itssubsidiaries, as permitted under the terms of the agreement with the Government. The minestarted production on 10 April 2015 after receiving requisite permissions, with nodisruption in supply of coal.
During the year, through its subsidiary, the Company commissioned and startedcommercial operations of its 600 MW thermal project in Haldia, West Bengal. Another 600 MWthermal project in Chandrapur, Maharashtra, has also been commissioned in 2013-14 byanother CESC subsidiary. Besides these, the Company has taken several initiatives to buildcapabilities and expand its presence in the renewable energy sector. During the year,through its subsidiary, the Company commissioned 26 MW of wind power project inGujarat.These have been discussed in the section on 'New Projects and Initiatives'.
CESC has placed special emphasis on building a customer centric organisation throughintroduction of customer friendly processes and deployment of technology. Significantefforts have also been made in the area of Human Resources to build an organisation thatcan deliver on the growth aspirations of the Company. These have been covered in greaterdetail in subsequent sections on 'Customer Service' and 'Human Resources'.
CESC used to operate four generating stations : Budge Budge, Southern, Titagarh and NewCossipore, which cumulatively generated 1,225 MW. Subsequent to the cessation ofgeneration at the 65 year old New Cossipore generating station during the year, thecumulative production of CESC's generating stations has come down to 1,125 MW. Theremaining three stations (Budge Budge, Southern and Titagarh) use pulverised fuel (PF) asthe primary energy source. In spite of the different age, capacity and technologies of thegenerating stations, CESC has achieved the best possible results, some ofwhich arenationally and internationally benchmarked.
Output from a power plant is measured by plant load factor (PLF) which is the ratio ofactual power produced to the maximum power producing capacity. The PLF for CESC's powergenerating stations has been consistently better than the all-India average for thermalplants. CESC's composite PLF of the three PF plants was 86.52% in 2014-15 which isdistinctly superior to the national average PLF of 64.5% during 2014-15.
To achieve higher PLF, the Company has taken various steps such as full utilisation ofdesigned limit, benchmarking with best-in-class power plants, integrated operation andmaintenance planning. A brief review of plant-wise performance during 2014-15 is givenbelow :
Budge Budge generating station comprises three units of 250 MW each. During2014-15, Budge Budge generated 5,853 MU (million units) of power, with a PLF of 89.08%.The plant availability factor (PAF) was 94.28%. Budge Budge unit was selected for BronzeShield for 2014-15 in the category of "Performance of thermal Power Stations" byCentral Electricity Authority (CEA).
Southern generating station comprises two units of 67.5 MW each. During theyear, it generated 990 MU of power, with a PLF of 83.73% anda PAF of 96.75%.
Titagarh generating station comprises four units of 60 MW each. During theyear, it generated 1684 MU of power, with a PLF of 80.11% and a PAF of 96.25%.
New Cossipore generating station which was established way back in 1949generated 69 MU with a PAF of 86.28%, has ceased generation with effect from 30 November2014.
During the year, the combined generation for the PF stations was 8,527 MU. The overallcombined availability of these stations was 95%. The entire maintenance planning has beenstructured to reduce: (a) forced outages; and (b) capital overhauling time.
To reduce forced outages, CESC adopts a number of measures. These include (i) detailedanalysis of each failure, (ii) taking appropriate corrective actions or processmodification to eliminate these in the future, (iii) mean time before failure (MTBF)analysis and benchmarking, (iv) time bound action plans, (v) periodic inspection schedulesfor all units, and (vi) adopting integrated condition monitoring of dynamic equipment withsophisticated hardware and software.
To reduce the capital overhauling time, CESC has a 'round the clock maintenance' regimeand modular replacement of components. The time saving technique of using a forced aircooling system to cool down the turbine in very short time has also yielded satisfactoryresults.
Energy Conservation and Quality
CESC's generating stations have also excelled in energy conservation by achievingextremely low figures for auxiliary consumption and heat rate. To achieve this, theCompany regularly undertakes technical enhancements, following best practices andimplementing recommendations of external energy auditors.
During the year, installation of variable-voltage, variable-frequency (VVVF) controlswas completed in all four units at Titagarh and two of the units of Budge Budge GeneratingStation. Apart from this, several on-going energy conservation measures were undertakenacross locations. These included :
Reduction of losses in compressed air systems and use of energy efficientlighting and equipment such as heaters, motors and measuring instruments.
Refurbishment of boiler feed pump, condensate extraction pumps and coolingtowers.
Thermo-graphic studies of drains/pipelines of boilers and turbines; and checkingof boiler feed pump re-circulation.
At CESC, energy conservation initiatives go beyond the core business activities. In animportant development, the 80-year old heritage building, the CESC House, received GoldCertification under the LEED rating system for Existing Buildings from the United StatesGreen Building Council (USGBC), for demonstrating its commitment towards environmentsustainability. During the year, CESC House also bagged the first runner-up position underthe commercial building category, in the CII-NDTV-Grundfos Mission Energy Challenge. Thisaward recognizes the commitment of the Group and CESC towards energy conservation. BudgeBudge unit has been awarded "Excellence in Energy Management 2014" byConfederation of Indian Industry.
All generating stations of CESC are ISO 9001:2008 certified in respect of QualityManagement Systems. Various quality projects are undertaken and implemented on a regularbasis. During the year, the Company extended the coverage of Kaizen. In 2014-15, 192improvement projects were implemented under this initiative, of which nine were adjudgedas having high impact. Overall, the programme has been a success and has achievedparticipation ofall levels of employees. Winners are awarded on a monthly basis forencouraging the participants and promoting the Kaizen culture.
At CESC, protection of environment is an integral part of the power generation process.The Company has laid out an 'Environment Policy' which governs its activities. Apart fromensuring compliance with all applicable legal and regulatory requirements, it has set morestringent in-house standards, and devised new and improved processes to achieve these. Ithas also adopted state-of-the-art technologies and the performance is closely monitoredfor assessment and rectification.
All generating stations of CESC are ISO 14001:2004 certified in respect ofEnvironmental Management Systems. The Company continuously explores ways by whichpollutants like suspended particulate matter (SPM) emitted from these stations can bereduced and maintained below the prescribed limits. All three stations have attained 'zeroeffluent discharge' status with 100% recycling of effluents. Two continuous ambient airquality monitoring stations have been installed: one at the Budge Budge generating stationand other at Bauria, Howrah.
Ash is another area of environmental concern, more so because of the high ash contentin Indian coal. Since 2000, CESC has achieved 100% utilisation of ash in an environmentfriendly manner. At the generating stations, energy conservation projects are regularlyimplemented to reduce the coal usage and thus, minimise carbon dioxide emissions. Few suchprojects have been registered and approved as CDM projects by CDM Executive Board underthe UNFCCC. Budge Budge was the first thermal power plant in the world to achieve suchdistinction.
CESC's environment friendly status has been acknowledged over the years by theGovernment and leading agencies working in this area. During the year, Budge Budgegenerating station has been rated best in environment performance by the Centre forScience and Environment, New Delhi. All three generating stations of the Company wererecognised at the Annual Greentech Environment Award (2014). Budge Budge unit was selectedfor Silver shield for the year 201415 in the category of "Environment ManagementAward Scheme for Coal Based Thermal Power Stations" by Central Electricity Authority(CEA).
Safety and Health
CESC maintains a high standard of industrial safety practices across its generatingstations and entire distribution wing. The Company has a Safety Cell with 15 dedicatedofficers from different functional areas to ensure safe work practices are followed acrossthe organisation. It has a 'Safety Policy' in place and carries out regular safety andoccupational health audits through internal safety committees, safety cell and externalauditors. The Company has taken an initiative to undergo strategic training programmesfrom the leadership team down to the level of managers on safety with internationallyreputed consultants to imbibe a culture for safety within the organisation and initiatenecessary changes in processes, technology and people.
All stations are OSHAS 18001:2007 certified for occupational health, and safetymanagement systems. In addition to adherence to prescribed safety practices, use ofpersonal protective equipment as well as proper tools and tackles have been mademandatory. Safety days are observed in all major establishments of the Company. Centralsafety day was organised at Science City Auditorium where more than 1,800 employees acrossthe Company participated. Safety Camps were also organised at 14 major sections/departments spanning for 10 to 15 days where work processes were reviewed in the light ofsafety considerations. Many other programs are regularly carried out to promote safetyawareness among employees. So far, about 50% of our entire workforce have been inductedthrough safety training, both classroom and on-field with a target to cover all workmen bythe end of 2015-16.
The Company ensures that all accidents are fully reported. All such incidents arethoroughly analysed to find out root causes and corrective and preventive actions areinitiated for implementation to avoid recurrences. Systems are also in place to encouragereporting of 'near misses' for proactive identification of potential hazards and enablingpreventive actions. At the same time, penalties are imposed if instances of nonconformitywith safety standards are reported. A comprehensive safety compliance level trackingsystem has been developed, which is thoroughly analysed and necessarycorrective/preventive actions are initiated on an ongoing basis.
As a result of these activities, accident rates have reduced substantially over thelast few years. During the year, all generating stations received the Greentech SafetyAward (2014) in recognition of its safety record and practices. This speaks volumes aboutadherence to safety standards, and practices followed for maintaining high standard inoccupational health and environment.
As a part of the occupational health initiative, CESC conducts health check-up for itsemployees including employees of contractors engaged in generating stations. The Companyoperates 30 dispensaries across the organisation with doctors and pharmacists manningthese dispensaries. Best-in-class medical facilities including diagnostic clinics forpathological tests are also available to the employees through tie-ups with major superspeciality hospitals and nursing homes in the city.
CESC undertakes continuous upgrading of the distribution infrastructure to enhance thequality and security of supply, and to reduce downtime, overloads and distribution losses.During 201415,1.87 lakh meters were installed on account of new supplies and replacements.New investments were made to strengthen the distribution network to cope with the growingsystem demand coming from new consumers as well as additional demand from existingconsumers, as also for replacement of old and ageing plant and equipment.
These include commissioning of new distribution stations and substations, augmentationof transformation capacities, establishing ring-main connectivity, and substantialaddition/replacement of the underground and overhead cable network along with the use ofmodern equipment. CESC is also in the process of carrying out special projects to upgradeits distribution network, enhance the network capacity and supply reliability forefficient handling of the demand growth. These have been detailed in Annexure 'F' to theDirectors' Report.
CESC expects its peak power demand to increase from around 2,000 MW in 2014-15 to 3,000MW in 2023-24. The Company has put together a master plan for development of itsdistribution infrastructure taking into account this long-term demand forecast. Thisincludes :
New connectivity with STU/CTU for import of power, and augmentationoftransformerand substation capacity.
Induction of gas insulated substations (GIS) at strategic distribution stationsto enhance network reliability, continuous upgradation of network and replacement of oldequipment.
A comprehensive study to validate the planned network, development of primarydistribution network and bulk power handling corridors, incorporating N-1 contingencies
In recognition of its efforts in the area of distribution, CESC received severalrecognitions and awards during 2014-15 :
"CBIP Award for Best Performing Utility in Power Distribution Sector"in recognition of outstanding contribution towards development of the Power Sector inIndia.
"Best performing Utility Urban : T&D Urban Discom" at 8th ENERTIAAwards 2014 India for Sustainable Energy and Power.
"Top Infrastructure Company Award" in the power distribution categoryby Dun & Bradstreet Infra Awards, 2014.
Energy conservation and reduction of losses in the distribution network is a key areaof focus for all power utilities. During 2014-15, a number of measures were adopted thatcontributed to the ongoing efforts to reduce ATC losses and increase energy conservation.Apart from the benefits from continuous upgrading of the distribution infrastructurediscussed in the previous section, other initiatives include: reactive power compensation,standardisation to higher rated underground cables, regular energy audits, progressivevoltage upgradation of distribution lines, energy efficient distribution transformers andinclusion of the energy efficiency metric in bid evaluation criteria for awardingcontracts. These have been detailed in Annexure 'F' to the Directors' Report.
Use of advanced technology-based systems and solutions has become an on-going processin CESC and has helped it to mitigate damage, significantly reduce downtime and improvereliability of the system network. However, a more important development in recent timeshas been increase in the use of technology in automation of processes, monitoring ofdistribution infrastructure and applications in customer service. Major initiatives inthis regard during the year were :
Smart meters, which provide alerts in the event of power failures, wereinstalled at around 150 critical locations. This enables the Company to restore supplypro-actively even before the consumer lodges a complaint. Smart meters were alsointroduced for net-metering purpose at customer premises with renewable energy sourcessuch as solar PV cells.
The coverage of automatic meter reading (AMR) using GPRS technology wasincreased during the year. Currently, the coverage is 100% for HT and LTCT consumers, and77% for distribution transformers (DTs).
The data available from smart meters and AMR enabled meters and DTs are beingused for analysis and outage management through IT solutions developed in-house by theCompany.
The US Trade and Development Agency (USTDA) had awarded a grant to CESC tofinance a feasibility study for recommending appropriate Smart Grid technologies and pilotprojects across the electricity distribution network. This study was carried out duringthe year and based on the recommendations, it is proposed to prepare a set of request forproposals (RFPs) for a new SCADA system with outage management features, relevanttelecommunication packages and a proof of concept trial for enterprise applicationintegration.
As a utility company that services 2.9 million customers, establishing and maintaininghigh levels of customer service is the overarching objective of CESC. Built on theprinciple of customer centricity, these measures have enabled significant improvement incustomer satisfaction and paved the way for more significant interventions throughdeployment of technology and process-based improvements in the area of customer serviceduring the year. The key developments during 2014-15 are discussed below :
New Connections : CESC added around 1.3 lakh customers during 2014-15.The average time taken to provide a new connection came down significantly due to aremarkable reduction in inspection-related delays, which currently happen within 2-3 days.This is followed up by a connection next day upon payment and compliance for 95% of theapplications. Online applications for new connections were made simpler by removing thehassle of uploading and downloading of documents. As a result, 16% of applications werereceived online in 2014-15 as compared to 1.6% in 2013-14.
Billing and Payment: The increase in coverage of Automated Meter Reading(AMR), which was discussed earlier, has significantly improved the efficiency and accuracyof the meter reading and billing processes. The Company was already providing web-basedaccess to billing details and online payment facility through credit/debit cards, netbanking, ECS and prepaid vouchers to its customers. During the year, it introduced theonline payment facility through RTGS/NEFT, Vodafone m-pesa and Bill Desk. To improve thecustomer experience, it renovated 15 cash collection offices and introduced 5 AnytimePayment Machines at locations where cash offices are not nearby.
Customer Contact: The Company operates a centralised and fullycomputerised 24x7 call centre as a primary consumer touch point for complaints andqueries. This has resulted in a reduction of around 40% in the footfall at RegionalOffices. During the year, it introduced weekly online chat with senior officers of CESC,where the Managing Director participates in the last week of every month. 34 such chatsessions were organized in 2014-15. It also introduced Floor Managers at Regional Officesto manage footfall and provide appropriate guidance to customers.
Supply Interruptions : As the call-centre is integrated with theCompany's distribution