Case Study on Loss Manegement in Case Study on Loss Manegement in Brazilian UtilitiesBrazilian Utilities

Marcos Aurélio Madureira da SilvaMarcos Aurélio Madureira da SilvaCorporate Commercial DirectorCorporate Commercial Director

Sistema Cataguazes-Leopoldina Sistema Cataguazes-Leopoldina

madureira@cataguazes.com.brmadureira@cataguazes.com.br

Brazilian electricity market overview NTLs concepts SCL’s losses fighting history New challenges to reduce NTLs Revenue Intelligence case study in

SCL

AgendaAgenda

IntroduçãoIntrodução Informe o motivo da discussão Identifique-se

BRAZIL OVERVIEW

8,500,000 SQUARE KILOMETERS

62 ELECTRIC UTILITIES

AROUND 180 MILLION INHABITANTS

AROUND 53 MILLION CUSTOMERS

Brazil – Electrical SectorBrazil – Electrical Sector Electrical Companys

o Generation (almost all State owned)o Trasmission(almost all state owned)o Distribuition (almost all privatized)

Regulatory and Controlo ANEEL – Regulatory Agencyo ONS – G and T

• Independent System Operator

o CCCE – Energy Trading • Contracts• Energy Bids• Spot Market

o Free Customers

Sistema Cataguazes- Leopoldina Sistema Cataguazes- Leopoldina 1905 - 20051905 - 2005

Northeast of BrazilNortheast of Brazil

Southeast of BrazilSoutheast of Brazil

BrazilBrazil

SAELPASAELPA Área: 54.595 Km2

Costumers : 861 thousand Inhabitants: : 3.000 mil

Área: 1.789 Km2

Costumers : 137 thousand Inhabitants: 450 mil

Área: 17.419 Km2

Costumers : 455 thousand Inhabitants: : 1.800 mil

Área: 17.331 Km2

Costumers : 390 thousand Inhabitants: : 1.200 mil

Sistema Cataguazes Market Share 2005

0,8% of Southeast 9,0% of Northeast 2,0% of Brasil

REF: 2005mar

REVENUE PROTECTION IS PART

OF A PERMANENT FINANCIAL

POLICY

Sistema Cataguazes- Leopoldina Sistema Cataguazes- Leopoldina

1905 - 20051905 - 2005

Cash-flow Cash-flow consequences of Nconsequences of NTLsTLs : Vicious cycle : Vicious cycle

Reduce Investment Capacity and Operational Efficiency

Reduce CAPEX

Reduce EBITDA

NTLs reduce EVAEBITDA - Earnings Before Interest, Tax, Depreciation and Amortization; EVA - Economic Value Added; CAPEX - CAPital EXpenditures.

SCL –Corporate Management ProcessSCL –Corporate Management Process

BOD

BUSINESS MANAGEMENT UNIT

DEPT. MANAGER

OPERATOR

GOALS

PROJECTS

ACTION PLANS

REPORTS

MONITORING

RELPORTS

MONITORING

REPORTS

MONITORING

NEGOTIATION

NEGOTIATION

NEGOTIATION

SCL - Commercial Losses Main Activities and ResultsSCL - Commercial Losses Main Activities and Results

Main Activitieso Field Inspectionso Fix Irregular connectionso Fix Damaged Meters o Fix metering instalationso Fix bad registers

Results o +50% reduction of commercial losses since

2001 until 2004 • 9% 2001 December• 4,3% 2004 December

PROFITABILY x AFFORDABLE SUPPLY RATESo Regulators push utilities to decrease commercial

losses (refusing to transfer NTLs to the tariffs)o Shareholders push top-management to achieve

positive EVA (profits greater than cost of capital)o Government, Regulators and Users push utilities

increase quality of energy while reducing rates

Challenge : Reduce NTLsChallenge : Reduce NTLs

Challenge : How to Reduce NTLsChallenge : How to Reduce NTLs

Lack of human and financial resources to perform all necessary actionso Field investigation, service orders to

reduce fraud / theft / commercial losseso Debt negotiation, consumer disconnection

(where permited by law) to reduce receivables losses

o Internal process optimization and auditing to reduce administrative losses

Challenge : Reduce NTLsChallenge : Reduce NTLs

There are new distribution solutions

Distribution solutionsDistribution solutions

Distribution solutionsDistribution solutions

Meters installed on the poleMeters installed on the pole

Challenge : Reduce NTLsChallenge : Reduce NTLs

There are new distribution solutionso But they are expensive…

As time goes by, frauds has became more sophisticated Criminal organizations selling “energy theft services” Endless mouse-cat game

New ChallengesNew Challenges We need to increase the search frauds process

efficiencyo How much ?o Where?o How kind?

To optimize NTLs reducing processo What are the priorities?o How the actions must be doing?o What is the adequated solution?o How is the optimal mix (New installations X

Inspections)

Data analysesData analyses

o We have a lot of data• Billing systems

• Meter systems

• Electrical Operation Measurement Systems

• Distribuition Electrical System Manegement

• Costumer Care system

• Irregularities detected by meter readers

o Those data are usually separatedo We need to put them togethero We have to think, plan and act with intelligence

Loss Reduction Strategies employedLoss Reduction Strategies employed

Which technologies should be employed, in what consumers ?

Limited financial resources it is necessary to optimize the resources

AMR with PLCAnti-theft cables, meters and sealsLoad balance up to transformersChange of pattern for input and distribution

Which consumers should be inspected ?

Universe of consumers

Graphs for productivity of inspectionsGraphs for productivity of inspections

Productivity without RI

Cost

Energy Recovered +Aggregated Optimal Point for

energy / cost

Increase of energy with same cost

Productivity with RI

SAELPA – Revenue Intelligence resultsSAELPA – Revenue Intelligence results

Recovered Energy (MWhR)o MWhR (May/03-Dec/03) 7.591 before RIo MWhR (May/04-Dec/04) 12.680 after RIo Increasing 67,05%

Aggregated Energy (MWhA)o MWhA per Inspection o 0,028 MWh/month 0,048 MWh/montho Increasing 71%

Revenue Intelligence - SAELPARevenue Intelligence - SAELPACompany Annual

salesRecovered energy annual increasing

Aggregated energy annual

increasing

Total energy annual

increasing

% of increasing in relation to annual

sales

Annual estimative of required

energy reduction

SAELPA 2.280 GWh 7,63 GWh 11,98 GWh 19,61 GWh 0,86% 3,6 GWh

Summary of Results in SCL-SAELPASummary of Results in SCL-SAELPA

Results of RI in SCL (one year after implementation):o Find NTL, uncover unknown NTLo Productivity increased (energy recoveried / inspections)

more then 67%, forecasting 0,86% annual increasing in total revenue

o Increased efficiency of investigation team up to 36% (average); some rules already achieved 73% efficiency

o Creation of a NTL Reduction Intelligence Dept. to reduce NTL and keep it low

o Auditable results and statistics to demonstrate

benefits to Management and Stockholders.

Marcos Aurélio Madureira da SilvaMarcos Aurélio Madureira da SilvaCorporate Commercial DirectorCorporate Commercial Director

madureira@cataguazes.com.br

55-83-2106-700255-83-2106-7002

www.scl.com.brwww.scl.com.br