Power Transmission & Distribution: Prepared by

Power Transmission & Distribution
Prepared by Dhiranjay Kumar 16 Joseph Dickson 17 Ankur Jain 29 Alap Jhala 31 Rajesh Kaim 34 Pankaj Mukne 55
CONTENTS
ABSTRACT
1) INTRODUCTION TO COST MANAGEMENT.......................
2) COST CUTTING 2.1 Introduction 2.2 Companies viewpoint 3) EFFECTIVE COST MANAGEMENT 4) POWER: INDIAN PERSPECTIVE 4.1 Significance 4.2 Challenges 5) POWER FLOW SYSTEM 5.1 Power Generation 5.2 Power Transmission 5.3 Power Distribution 6) ECONOMIC ASPECTS OF POWER 7) COST MINIMIZATION TECHNIQUES 7.1 Technical methods 7.2 Commercial Methods 8) CONCLUDING REMARKS BIBLIOGRAPHY
CHAPTER 1 INTRODUCTION TO COST MANAGEMENT
Definition: Cost Management is a process whereby companies use cost accounting concepts to report or control the various costs of doing business. It is also a Strategic process that stresses the optimization of efficiency. Detailed concept: It describes the approaches and activities of managers in short run and long run planning and control decisions that increase value for customers and lower costs of products and services For example, managers make decisions regarding the amount and kind of material being used, changes of plant processes, and changes in product designs. Information from accounting systems helps managers make such decisions, but the information and the accounting systems themselves are not cost management. Cost management has a broad focus. It includes but is not confined to the continuous control of costs. The planning and control of costs is usually inextricably linked with revenue and profit planning. For instance, to enhance revenues and profits, managers often deliberately incur additional costs for advertising and product modifications. Cost management is not practiced in isolation. It is an integral part of general management strategies and their implementation. Examples include programs that enhance customer satisfaction and quality as well as programs that promote new product development. Many cost management concepts are inevitably intertwined with manufacturing and production concepts, such as lean accounting, value chain analysis, throughput accounting, theory of constraints, etc.
CHAPTER 2 COST CUTTING
2.1
Introduction
Reduction in cost can be achieved by doing the cost cutting but costcutting will not necessarily benefit a company and quite often can have a negative impact in the medium or long-term. Cost cutting will usually fail to produce long-term results and will likely to harm the company. Cost cutting is short sighted and random and is not based on the company's business strategy. It is usually a reaction to immediate problems. Cutting costs will overcome a short-term need, but the process will have to be repeated in the near future because the real problems were not solved only the symptoms were dealt with.
2.2
Companies viewpoint
Companies need to manage their costs. Managing costs does not focus on cost cutting, it entails waste elimination. It focuses on eliminating unnecessary expenditures (waste) while focusing resources on the customers. Utilization of buffer resources leads to increased efficiency. It is estimated that most companies are wasting about 30% of their expenditures on items that do not have any impact upon their customers. Investment should be made in selected expenditures that will achieve specific revenue. Primary focus should be on the customer satisfaction and profitability thereby optimizing the results. Hence, cost management will ensure long-term growth and profitability
CHAPTER 3 EFFECTIVE COST MANAGEMENT
Six steps to effective cost management

Understand what causes the cost and revenue structure of the business.
This is the most critical item in cost management. Many companies do not have accurate information on what their true costs are. A company must first identify exactly where its revenue comes from--products, services, customers, and sales channels.
Understand and reduce inter-functional complexity.

In any organization, the way any one department operates is influenced by other parts of the company. For example, marketing has an influence on inventory levels, which effect warehousing and transportation costs. The complex cause- and-effect relationships must be sorted out. Reducing complexity means constantly questioning why work is done, and how it
can be done more efficiently. Provide the tools to manage costs.

Provide the skills (i.e. decision- making, problem-solving, team-building, and other thinking skills) It will enable employees to better understand how to control costs, improve quality and productivity, and enhance performance.
Involve employees in decisions.

Employees will need to understand the company's objectives and have accurate cost information. Input from the employees will not only give management a better understanding, but it will give employees more incentive to become involved.
Companies that actively take suggestions from their employees will undoubtedly find better and more cost effective ways to do things.
Increase effectiveness and continuously improve costs.

Redefine the company's cost structure to select the costs that generate profit. Cost management must become standard operating procedure. Management and employees must be constantly identifying opportunities for eliminating or reducing unprofitable work.
Measure decisions against the strategic business plan.
CHAPTER 5 POWER FLOW SYSTEM
Diagram of the Power Generation, Transmission and Distribution System
5.1 Power Generation It is a process of creating electricity from other forms of energy. For electric utilities, it is the first process in the delivery of electricity to consumers. The other processes, electric power transmission, electricity distribution, and electrical power storage and recovery using pumped storage methods are normally carried out by the electrical power industry. Sources of power can be grouped into 2 categories Renewable Solar Geothermal Hydro power Wind power
Biofuel
Non-renewable Fossil fuels like Coal, Petroleum, Natural Gas etc Nuclear fuel Uranium
http://www.osha.gov/SLTC/etools/electric_power/illustrated_glossary/tr ansmission_lines.html
5.2 Power Transmission Transmission lines carry electric energy from one point to another in an electric power system. They can carry alternating current or direct current or a system can be a combination of both. Also, electric current can be carried by either overhead or underground lines. The main characteristics that distinguish transmission lines from distribution lines are that they are operated at relatively high voltages, they transmit large quantities of power and they transmit the power over large distances.
5.3 Power Distribution A distribution system originates at a distribution substation and includes the lines, poles, transformers and other equipment needed to deliver electric power to the customer at the required voltages. Customers are classed as: Industrial Customer Commercial Customer Residential Customer Transportation Customer A distribution system consists of all the facilities and equipment connecting a transmission system to the customer's equipment. A typical distribution system can consist of: Substations Distribution Feeder Circuits Switches Protective Equipment Primary Circuits Distribution Transformers Secondaries, and Services
CHAPTER 7 COST MINIMIZATION TECHNIQUES
7.2 Commercial Methods

Effective tax planning For Electricity Distribution in Suburban area of Mumbai, Transformer is significant component used for distribution network. Company procures the transformers from number of suppliers located all around the country. Many Manufacturers deal through their distribution agents / authorized dealers instead of dealing directly with REL. For this project we are considering one of manufacturer based in the Bangalore whose dealer is based in Mumbai Cost of Transformer is Rs.10 Lac. Manufacturer based in Bangalore sells this transformer to ( Mumbai). Tax levied = Sales with CST @ 4% against form C to the agent Agent ( Mumbai) then sells this transformer to REL ( Mumbai) Tax levied = Sales to REL with MVAT @ 4 % Cascading effect of taxation on the basic cost of Transformer, which is calculated as follows : CST on Basic cost ( @4%) VAT on basic cost + CST ( @ 4%) Hence Total tax burden : Rs. 40000 : Rs. 41600 : Rs. 81600 Agent
To avoid cascading effect of tax, REL decided to have a contract with this supplier under Section 6(2) of CST act 1956 i.e. Sale in Transit.
Manufacturer ( Bangalore ) By filling Forms (Form E1, Form C, Form E2) REL could save of Rs 41600 per transformer in form of saving in tax.
In this transaction even though order is placed on agent, only 4% CST will be applicable. Thus tax will be calculated as follows. CST on Basic cost ( @4%) Hence Total tax burden : : Rs. 40000
Rs. 40000
Outsourcing of replacement of old energy meters As discussed in case 3, REL had taken the decision to replace old electromechanical meters with new static meters. WITHOUT OUTSOURCING: Earlier the actual field work i.e. replacement of the meters were carried out by a team of field inspector and his helper. This team was used to carry new static meter to the site and replace the old meter. After this old meters were sent for further process of scrapping. Details of the expenses for the job is as given below. WITH OUTSOURCING: To exercise the option of outsourcing, REL invited quotations from the qualified external agencies with some predetermined conditions as follows: Team member should be qualified wiremen (ITI) Minimum one computer literate person for data entry in ERP
Earnest deposit money (Rs. 50000/-) Facility for transportation of meters. Bank account in ICICI or HDFC for payment through ECS The external agencies who were ready to fulfill these conditions submitted the quotation. After the technical and commercial screening of these quotations, 15 agencies were selected for this work. The replacement cost per meter was fixed at Rs. 15. The total project cost is worked out as follows: Head No. of Meters to be replaced Replacement cost per meter Total expenses for project (A*B) Numbers 3,36,924 Nos. Rs.15 Rs. 50,53,860
Comparison Expenses for project
: Cost per Meter (Rs.) 48 15 33 Total Cost (Rs.) 1,62,00,000 50,53,860 1,11,46,140
Without Outsource With Outsource Net Savings
Conclusion : The option of exercising outsourcing option proves to be beneficial for REL on two fronts, Cost : Replacement Cost was reduced by Rs. 1.11 Cr (min.) Time : Here the contractors were asked to complete this job within 7 months. This helped REL to improve its cash flow as discussed in case 3 (Reduction in losses) Prepaid Electricity cards This concept was first introduced in South Africa by ESKOM. Energy meters, the only direct revenue interface between utilities and the consumers, have undergone several advancements in the last decade. The conventional electro-mechanical meters are being replaced with electronic meters to improve accuracy in meter reading. Countries across the world are currently looking to introduce prepaid electricity meters across their distribution network, buoyed up by the success of this novel methodology in South Africa. The existing inherent problems with the post-paid system and privatization of state held power distribution companies are the major driving factors. Over 40 countries have implemented prepaid meters in their markets. In United Kingdom the system, has been in use for well over 70 years with about 3.5 million consumers. The prepaid program in South Africa was started in 1992, since then they have installed over 6 million meters. Other African counties such as Sudan, Madagascar are following the South African success. The concept has found ground in Argentina and New Zealand with few thousands of installations. The prepaid meters in the market today are coming up with smart cards to hold information on units consumed or equivalent money value. When the
card is inserted, the energy meter reads it, connects the supply to the consumer loads, and debits the value. The meters are equipped with light emitting diodes (LED) to inform consumers when 75 percent of the credit energy has been consumed. The consumer then recharges the prepaid card from a sales terminal or distribution point, and during this process any changes in the tariff can also be loaded in the smart card. Benefits of prepaid meters 1. 2. 3. 4. 5. 6. Improved Cashflow - easy budget control No Credit and Arrears Collection Costs Risk of late or non-payment for utilities eliminated/reduced. Customer friendly initiative - No Deposits No Monthly usage Bills - Reduce paper cost. No Reconnect Charges Electricity always paid. No manual handling is required. System is Electronic chip based handled at substation. 7. Easy monitoring - Greater awareness and control of costs. Avoids any bill complaints on usage. Recent Initiatives

The Sabah Electricity Sdn Bhd (SESB), Malaysia, has awarded a contract to a local manufacturer to supply 1,080 prepaid meters Countries such as Thailand, Bangladesh, Singapore, and Iran have been showing increased interest in adopting prepaid system In India, the State of West Bengal has decided to introduce the smart card operated prepaid energy meters in remote islands of Sunderbans. In Mumbai, pre-paid power is provided by the Brihanmumbai Electricity Supply and Transport (BEST) Undertaking.Tata Power plans to introduce pre-paid electricity in Delhi. Tata Steel is likely to install prepaid electricity meters at its employee township in Jamshedpur.

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