Assesses the degree of productivity and efficiency of the transmission and distribution systems and it is analyzed to design a plan to improve the technical and non-technical (commercial) losses.
This tool facilitates comparing the performance of an individual utility with the database of utilities in the Latin America and Caribbean region. The users can enter their individual performance on the indicator and the chart will display its performance against the database.
For more information regarding the financial management and sustainability, please consult the Case Studies:
Data and statistics from the energy sector, including indicators on electricity losses can be found at the IDB energy hub.
The energy hub is constantly updated with new information.
This activity assesses the degree of productivity and efficiency of the transmission and distribution systems of the utility. It analyzes indicators and benchmarks and introduces best practices when designing a comprehensive plan to improve the technical and non-technical (commercial) electricity losses.
Electricity losses usually converge to the difference between the amount of electricity that enters the network and the amount that exits the network (final demand consumption and/or energy delivered to other networks). In the case of a utility that it is vertically integrated, the losses represent the difference between its generation injected into the grid and the amount consumed by the final demand. In a few cases, it may include the electricity billed to consumers but not collected after a reasonable amount of time (usually 180 days). This however represents a financial loss in the account receivable as part of the provision for bad debt (or allowance for uncollectable accounts). For the purpose of the Electrokit it is considered an accounting or financial loss (dependent on the accounting rules of each country), and not an electricity commercial loss.
In this context, the reduction in electricity losses brings important financial benefit to the distribution utility but they cannot be an isolated activity. The reduction of losses is usually part of a strategic transformation of the utility with other performance improvement activities as it requires prioritization of investments and allocation of resources. These are described later in the best practice section.
Electricity losses can be divided in two parts:
* Technical losses: correspond to all the energy dissipated in the transport of electrical current in conductors, equipment, and connections due to resistance in the distribution network. Technical losses can be further divided into: (i) fixed technical losses (caused by physical inefficiencies such as hysteresis, Eddy Currents losses in the iron core of transformers, and the corona effect in transmission lines) and (ii) variable technical losses (which can happen when power current flows through the lines, cables, and transformers of the network. These are also called load losses, or series losses).
* Non-technical losses or commercial losses are those usually associated with the sale of energy supplied to the end user. There is a part of the energy that is produced, transported, and supplied; however, it is not invoiced. These losses can be caused by internal or administrative problems (such as errors in measurement, accounting or record keeping) but they are usually associated with the consumer's own illegal intervention, such as thefts, fraud, alteration of meters, or unmetered supply (when the consumer is responsible).
International experience in the management and reduction of electricity losses indicates that a company must have a “holistic view” of this activity since it integrates several units, and the results have a large impact on its financial and operational results. The LAC region has implemented successful electricity loss programs, and these are illustrated in the next section of references. Considering the indicators calculated for this company compared to external references, and the good practices described below, it is possible to establish an action plan with the activities to reduce electricity losses.
For each practice, the main “insights” found in companies that have been successful in this field are listed. These insights are not authoritative, since each company must adapt the practices to its reality, however they serve as general guidelines to assist the company to advance its respective good practice.
The practices of electricity losses are organized in 10 items across three main groups which are presented next: (i) public actions and State leadership; (ii) operations, commercial, and financial practices part of a distributing company (core part of the activities of a distribution utility), and (iii) social and equity considerations.
Data and statistics from the energy sector, including indicators on electricity losses can be found at the IDB energy hub.
The energy hub is constantly updated with new information.
Designing an Action Plan
The development of an action plan is an important result from the review of the indicators and best practices of the processes for the utility. As an additional functionality of the toolkit this chapter presents the main activities to be considered to support the identification and prioritization of what are the most relevant practices to the utility and what are the best ways to develop and implement an action plan.
The definition of a comprehensive and well thought action plan is essential to attract investment opportunities and communicate the expected results. While there are different methodologies to design an action plan, most of them converge to similar activities, which are presented next as the steps in developing the plan.
Step 1 - Define problem and analyze data
Action plans usually start by clearly defining the main problem facing the utility andpolitical willingness to address it. This is done by collecting and analyzing the data and verifying previous assumptions of the problems that triggered the review. The toolkit can be an important methodology to identify areas where the indicators of the utility are below the references, benchmarks, or regulatory standards, and what are the best practices the utility can introduce. Still within this first step, usually teams define the goal and targets the utility would like to achieve, which in turn defines the level of ambition of the action plan.
Step 2 - Prioritize activities
Subsequent to the definition of the problem and expected results, the utility will need to prioritize the areas of intervention. This prioritization is done by segmenting the activities in different dimensions of: (i) impact or effectiveness (i.e., which activities Will deliver the highest impacts or benefits); (ii) timeframe (i.e., what is the best sequence of activities in the short, medium, and long term considering the expected benefits); and (iii) efficiency (i.e., based on quantitative measures such as cost benefit analysis, which of these activities will deliver the highest returns for similar levels of investment). Lastly, this prioritization should also identify synergies and complementarities among the activities to be consolidated in a single action plan.
Step 3 - Identify resources
Based on the action plan previously defined, it will be important for the utility to seek the financial and knowledge/expertise resources, as usually these activities need investments. Some utilities may have their own teams and financial resources to implement the action plan, while others will need to seek external financing and/or bringing technical expertise (example of new technology). Some sources of financing can be concessional with favorable commercial terms, which can make the action plan more feasible to be implemented. In this step it is also important to proactively seek and obtain support from the relevant country stakeholders (e.g., government authority, regulators, industry association, etc.) and clear understanding on the expected impacts and benefits of this action plan.
Step 4 - Prepare to implement
Lastly, the utility needs to develop a detailed implementation plan, not only including the activities previously defined, but also the governance model of the implementation (e.g., definition of team responsibilities and authorities, level of dedication, etc.) and how progress will be monitored and evaluated. Adaptability becomes a key ingredient of the plan, and an important reminder is to keep into perspective that11 “a business/action plan can't be a tightly crafted prediction of the future but rather a depiction of how events might unfold and a road map for change”. The results from the readiness to implement, together with seeking the political support and securing the financial resources are the last activities before implementation.
In sum, this chapter presented in general terms how utilities can develop a robust action plan and increase the likelihood of successful implementation, using the results from the areas of this toolkit.