52153 Session 3: T Hybrid his session focused on “hybrid” electrification models. Under a Electrification traditional electrification business model, the national, state- Models owned utility builds medium and low voltage grids in previously unserved rural locations. The state-owned utility provides a “complete electrification package” from extending the national grid to villages combined with selling at retail to newly connected customers in these villages. In contrast, the hybrid approach usually involves a partnership between at least two entities: the national state-owned utility (or provincial utilities) and local distribution entities. Under this hybrid arrangement, the national or provincial utility typically constructs medium and low voltage lines and then sells power at wholesale to local distribution entities (LDUs) who then resell it at retail. The LDUs may be private operators, cooperatives or affiliates of the national utility. The first two presentations described how hybrid models have been implemented in Vietnam and Bangladesh. The third presentation focused on a different hybrid model known as “top down” concessions. This model, which is being implemented in Mali and Senegal, involves competition by private companies for concessions to serve large geographic areas through both grid and off-grid electrification. Electrification in Vietnam  The basic business model was EVN (the national government owned utility) selling at wholesale to LDUs. The Tuesday, June 9, 2009 LDUs, each typically serving about 1,000 households, are cooperatives, private companies or EVN affiliates. Using this approach, Vietnam’s household electrification jumped from 14% in 1993 to 97% in 2008.  Where an LDU was operated by EVN, EVN typically hired a local person as a “service agent” to prepare bills, collect payments and perform basic maintenance. The service agent, who is an independent contractor, typically earns about USD$30 to 120 per month. This arrangement often produces cost savings for EVN of about 30 to 40% compared to the alternative of using EVN’s own employees to perform the same services. Service agents also seem to be more effective in providing good customer service because they live in the area where they work and their contracts with EVN contain strong performance incentives.  Overall connection costs per household for new customers connected to EVN’s main grid have ranged from USD $297 to 400 so far. These capital costs have been shared between EVN, provincial governments, LDUs and the new customers. EVN’s share of connection costs has been increasing in recent years.  Non-uniform tariffs were allowed up to this year. Beginning in March 2009, the national government has required a uniform national tariff. LDUs are subsidized through bulk power tariffs that apply to their wholesale purchases from EVN.  LDU collections are close to 100% and technical losses are down to 7 to 10%.  EVN, like REB in Bangladesh (see below), has standardized construction standards and installation methods. Rural Electrification Cooperatives in Bangladesh  Bangladesh has created 70 rural electricity coops (known as PBSs). The typical PBS functions as a local distribution utility by buying electricity at wholesale off the main grid from BPDP and then reselling it at retail. Collection rates are close to 100%. The size of PBSs range from 35,000 to 270,000 customers. Seventeen PBSs have reached a financial breakeven point.  The Rural Electricity Board (REB) provides one-stop assistance to PBSs in the form of subsidized financing, grants, training (technical and commercial), construction, staffing in early years and ongoing performance monitoring.  As in Vietnam, initial capital costs have been lowered through construction standardization by the REB (design, installation and central purchasing of materials). Other operational activities, both commercial and technical, are standardized through guidelines known as the “REB Instruction Series.” (The “mother of all manuals.”)  The REB has been the conduit through which more than USD $ 1.3 billion in donor financing (loans and grants) from 18 donors has been channeled.  The REB has detailed performance agreements with PBSs that include financial rewards and penalties. REB also conducts bi-annual management audits.  Bangladesh’s new national electricity regulator approves an overall tariff band for the PBSs but the REB sets tariffs for each PBS based on a detailed, individualized cost of service analysis. Hence, the REB is the de facto regulator of the PBSs. To minimize regulatory burden, the national regulator has given an umbrella license to the REB rather than separate licenses to individual PBSs. Top Down Concessions for Private Operators in Mali and Senegal  Mali uses both a “top down” and “bottom up” approach to rural electrification. Under the top down approach, the country has been divided into 10 concession areas based on socio-economic characteristics rather than administrative or political boundaries. Through the REA, the Government of Mail will give grants to top down and bottom up operators of up to 80% of connection capital costs. Operators must provide 20% equity. Disbursement of the grants is closely tied to success in achieving connections.  The award of “top down” concessions is still in process in both countries so there are no functioning “top down” concessions. The subsidies for top down concessions are attractive but there has been political instability and questions about the fairness of the bidding process.  At the same time, Mali has had considerable success with spontaneous bottom up concessions in smaller geographic areas (i.e., one or more villages). This success has helped to test the viability of regulatory and financing models and the development of workable technical standards. Most “bottom up” concessions are small isolated mini- grids that use diesel energy to produce electricity only during the evening hours. A few are connected to the main grid and buy electricity in bulk (i.e., at wholesale) and then resell the electricity at retail to domestic and small commercial customers. (This is similar to the hybrid business models that exist in Vietnam and Bangladesh.) Presentations: Electrification in Vietnam, Hung Van Tien, World Bank Rural Electrification Cooperatives in Bangladesh, Nazmul Chowdhury, Rural Electrification Board Top Down Concessions for Private Operators in Mali and Senegal, Koffi Ekouvei and Reto Thoenen, World Bank