CEB FALLS BEHIND LECO IN EFFICIENCY

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This is the fourth and last part of a series of articles on Lanka Electricity Company (Pvt.) Ltd.  It’s based on a report titled ‘The Story of Lanka Electricity Company (Pvt) Limited (LECO)’ and released on ADB’s website on 18 July 2022. The first part, published previously, revolved around the Birth of LECO. Part two: ‘Justification for the Birth of LECO’, Part three: ‘Privatisation of LECO Stumped’ and the fourth and final part, ‘CEB Falls Behind LECO in Efficiency’.

By 2000, 17 years into Lanka Electricity Company (Pvt.) Ltd’s (LECO’s) existence and with a customer base of 330,000, LECO reduced distribution network losses to 8.5 per cent, when the parallel utility Ceylon Electricity Board (CEB) was saddled with losses estimated at 15 per cent in distribution, Asian Development Bank (ADB) in a recent report said.

The report titled ‘The Story of Lanka Electricity Company (Pvt) Limited (LECO)’ and released on ADB’sts website on 18 July 2022 further said.

While LECO moved toward the standards of a world-class distribution utility, the physical planning of the country did not move to the expected standards in urban planning and space management. LECO currently plans to establish a 33 kV backbone network to connect existing primary substations and operate a combined 33 kV and 11 kV mixed system. Transfer of large customers to the 33 kV network, converting selected overhead lines to underground cables, and introducing network automation are all being planned. LECO has been able to maintain good voltage regulation due to its farsighted policy of adhering to the concept of ‘smaller transformers–shorter lines’ and following the guidelines laid down in the design of low-voltage distribution schemes

LECO has been monitoring its system reliability in compliance with the performance standards laid down by the government under the Electricity (Distribution) Performance Standards Regulations of 2016. Good monitoring of reliability data enables LECO to identify trends. LECO is currently observing an increasing trend of outage events and duration of outages. LECO is expected to provide its customers with reliability levels on par with the capital city of Colombo. The city has fully underground transmission and distribution networks and LECO serves urban areas to the north and east of Colombo. Early identification of a rising trend in outages allowed LECO to formulate a project to strengthen the eastern suburbs with an underground network.

LECO today develops 10-year long-term development plans and continues the legacy of planning as a key to success.

 D. L. Gunawardena is currently the customer services superintendent in Maharagama, a fast-growing suburb of Colombo. He joined LECO in 1984 and served in many positions in Kotte, Nugegoda and Maharagama. He recalled the initial interventions LECO had in improving customer service and how it continued to lead, setting a benchmark for others to follow.

“Since our first customer was connected in 1983, we read customer electricity meters every month and immediately issued the bill at the customer’s doorstep, a great intervention nobody could have imagined at the time,” he said. At the time of taking over council networks by LECO, customer services were not at acceptable levels.

Strong foundation for LECO

In a way, that helped build a strong foundation for LECO with improved customer service, based on a strictly customer-oriented policy in all ground-level activities. When customers experienced LECO’s high-quality service, they immensely appreciated it and were glad that LECO was established. One important customer concern was how fast LECO processed applications for new power connections. LECO changed the previous practice: an application was reviewed within three days. Technical officers were assigned to provide cost estimates for the connection. For example, in Kotte, there were three technical officers to prepare estimates for new customer connections.

After the estimation was completed, the customer was informed to pay. Once the payment was made, the connection was given within 10 working days. Since there were officers who were specifically assigned to prepare estimates and construction, LECO was able to provide a new connection within 14 days from the date of application. This was a remarkable achievement in the 1980s. There were problems in the billing procedure of councils. They first read all the meters and later sent the bill to the customer by hand or by post. For the first time in the country, LECO initiated the policy of doorstep billing, by issuing the bill immediately after the meter was read. That concept was introduced by LECO, and it eliminated most of the problems in billing.

At the inception of LECO, complaints were accepted centrally at the Kotte office and there was an officer to attend to them elsewhere. But now, every customer service centre accepts complaints. Any customer of any category can submit applications and complaints to the same office. Customers had to visit a branch office only to make a payment, but that too was soon simplified in the late 1980s by accepting payments at a wide range of outlets, including designated grocery shops.

LECO’s policy of using insulated, bundled conductors for distribution lines and concrete poles of a superior design was criticised by politicians and the public alike to be ‘overdesigned’. However, it was later proven to be a very good initiative of LECO.

 Damages and subsequent loss of electricity supply were drastically reduced when bare conductors used by councils were replaced with bundled conductors, fixed on newly designed poles.

The pole, specially designed for LECO, could be fixed without a stay-wire or a strut which would require land space in the vicinity. This was greatly appreciated by landowners, particularly those with limited garden space in congested cities. On attending to breakdown of supplies in the early days until 1985, since there was no radio communication, complaints were written on paper and handed over to the maintenance team.

There were three people assigned to a breakdown gang. In some cases, a technician was also the driver who had been given permission to drive. If they could not handle the situation, another team with heavy equipment would be called to take over. With radio communication and computerisation, the manual record was followed by its being entered into the outage management system and communicated to the maintenance crew over the radio. Interestingly, there was no formal contract for electricity supply between the customer and the council until LECO introduced one. That new agreement was the only thing some customers protested on.

Bulk supply tariff

Bulk supply tariff comprises generation tariff, transmission tariff and bulk supply and operations business tariff and they are determined by the regulator, following the rules established in the tariff methodology.

 LECO has demonstrated that distribution costs per kilowatt-hour (kWh) declined in real terms, as the utility sells more electricity over the same network. However, as the utility assets age, they must be replaced and the network requires upgrades to meet the increasing customer expectations of higher reliability and to absorb distributed generation. The tariff methodology followed by Sri Lanka since 2011 to determine prices for inter-licensee transfers was prepared with technical assistance from ADB.

 Since 2011, the transmission licencee (CEB) and the five distribution licencees were allowed a two per cent return on assets while depreciation, interest costs, operation and maintenance costs, and taxes are fully allowed. LECO is the distributor out of the five distributors, with the customer mix yielding the highest revenue per unit of electricity sold. The methodology, therefore, requires LECO to purchase at a higher ‘adjusted’ bulk supply tariff.

LECO is independent. The company has to manage all its operational expenses and depreciation; pay interest; and earn profits, with Rs3.20 per kWh (estimated for 2019, in nominal terms) allowed to be retained out of the income from electricity sales

The first few rounds of the new tariff methodology were based on a number of assumptions. As the methodology matured, the profits of LECO stabilised. From the business of electricity distribution and supply, LECO has maintained remarkably good profits since 2011. LECO’s operational asset base is Rs10 billion and the return on assets is limited to two per cent.

 Therefore, the allowed profit from electricity distribution business is estimated to be limited to about Rs250 million per year, by 2018. The company worked within the allowed revenue and earned profits in excess of the two per cent return on assets allowed, in 2017, 2018 and 2019.

 Upcoming investments have received regulatory approval through the biennial submission and review of the distribution plan. As such, LECO expects to implement efficient operation and maintenance practices to offset the relatively large debt repayments and interest expenses, once the upcoming loan for distribution upgrades has Upcoming investments would double the ‘been’ disbursed.

 Energy meters

The company manufactures all energy meters for household customers of both CEB and LECO. The company provides meter testing and calibration facilities to the highest accuracy and holds International Organization for Standardization (ISO) 9001:2008 and ISO IEC 17025:2005 certificates for its quality service.

LECO improved the connection method of rooftop solar PV by installing a production meter, in addition to the two-way export-import meter. The two-way meter records only the net of imports and exports between the customer and the grid. It is not possible to record the actual amount of electricity produced and used by the customer because such usage is direct. The new smart meter comes with the capability to capture the full production, import and export information, thus assisting to gauge the energy performance of the systems installed. Additionally, it helps to keep the national energy accounts correct. LECO is already experiencing power quality issues owing to very high daytime electricity injection to low-voltage distribution lines from solar PV. Until 2016, only net-metered solar PV systems were allowed. Two extended schemes are now offered, a ‘net-accounting’ scheme where surplus energy LECO was the first distribution utility to connect net-metered rooftop solar PV systems in Sri Lanka.

LECO is already experiencing power quality issues owing to very high daytime electricity injection to low-voltage distribution lines from solar PV. Until 2016, only net-metered solar PV systems were allowed. Two extended schemes are now offered, a “net-accounting” scheme where surplus energy from solar PV is paid for, and the “net-plus” scheme where rooftop solar PV is treated as a stand-alone microgenerator.

 Higher capacity additions and higher reverse power flows toward the grid from the customer end are now visible at midday. In some residential areas, reverse power flow during daytime is significantly more than the daytime demand. By 2019, LECO had recorded 12 such specific cases of overvoltage in the low-voltage distribution network. The problem is expected to grow. Solving Emerging Problems of Distributed Generation, LECO purchased 66 gigawatt-hours (GWh) from rooftop solar PV in 2020, amounting to four per cent of total purchases.

 LECO wants to minimise curtailing rooftop solar PV owing to network constraints. Since 2018, LECO has been assisting a joint research project at the Moratuwa University and Wollongong University, Australia. The study objective is to develop solutions to the problem of rising customer-end voltages and the broader issues of determining the “hosting capacity” (capacity to accommodate rooftop solar PV capacity).

Rooftop solar PV system

The ongoing research has established rules for accommodating a rooftop solar PV system, on the basis of line lengths, customer mix, and potential random location of applicants to connect solar PV system. LECO is also planning research on possible options to increase the hosting capacity of low-voltage networks, to facilitate more distributed generation. The duration of such events has increased since 2016 due to the policy of not switching on 11 kV lines after a tripping event until the line is physically inspected. Even if this issue is solved, the limitation of lines and vulnerability to external events will remain as long as the LECO medium voltage network remains uninsulated and overhead.

ADB is assisting LECO to implement the best strategy to upgrade the medium voltage network. An upcoming proposed project by ADB would provide a new grid substation at Kelaniya and lay new 33 kV underground distribution lines to improve the upstream reliability of the LECO network. Therefore, the network topology is proposed to be changed. Currently, it is an entirely overhead, uninsulated network of upstream 33 kV lines of CEB and LECO’s own 11 kV lines. The new topology will use the advantages of direct access to a grid substation, and build new upstream underground 33 kV lines and some new 11 kV underground lines. LECO does not see the merit in changing the entire distribution network from overhead to underground. In the upcoming upgrades, LECO plans to install “packaged substations.” These ensure the required insulation against impacts of weather and human activity while being cost-effective. Therefore, the LECO system will have new assets, of specifications not previously used, such as (i) outdoor 33 kV for low-voltage substations to serve bulk customers or retail customers, (ii) 33 kV underground lines, and (iii) 11 kV for low-voltage packaged substations.

Similar upgrades to underground 11 kV and 33 kV lines are planned for several other

By Paneetha Ameresekere