IRAQ DRAFT Terms of Reference Technical Assistance to the Ministry of Electricity For Electricity Services Restoration and Operations Efficiency

Transcription

1 IRAQ DRAFT Terms of Reference Technical Assistance to the Ministry of Electricity For Electricity Services Restoration and Operations Efficiency Background 1. Inadequate electricity is seen by the Government of Iraq (GoI) as a top concern, impacting daily life of the people and at the same time is a burden on GoI s budget. The electricity sector in Iraq has a number of concurrent challenges. Low operational efficiency, high levels of electricity losses, and obsolete network equipment have led to average levels of aggregate technical and commercial losses of around 70 percent of total electricity generated. This level means that nearly half of energy transferred to the distribution network from generation is lost before revenues can be collected. Cost recovery is also extremely low and collected revenues cover only about 10% of the operational expenditures. In addition, electricity generation plants do not receive adequate natural gas. It is estimated that the amount of gas currently flared would be sufficient to meet most of Iraq s unmet gas demand in the electricity and industrial sectors. 2. To address the sector challenges, the GoI has prepared a sector strategy, the Iraq Integrated National Energy Strategy (INES) for the period which was adopted in April The INES aims to develop the energy sector in a manner that maximizes revenues, creates energy security, diversifies Iraq's economy, create jobs, and does so in an environmentally and socially sustainable manner. Overall, the Iraqi Government is now intent upon reforming the sector, and gradually bring it into accordance with international best practice, including through private sector participation. The Ministry of Electricity (MoE) has outlined a broad plan to improve the sector s financial position, decrease its reliance on government budgetary transfers and subsidies, and increase the efficiency and reliability of electricity supply by: a. Increasing private sector participation in electricity generation in order to meet the country s load growth projections; b. Gradually introducing private sector participation in electricity distribution and retail, initially through services contracts limited to billing and collection and operations and maintenance; and ultimately through privatization of distribution directorates (currently de facto SOEs), once infrastructure has been sufficiently strengthened and minimum levels of commercial performance have been achieved. c. Restructuring tariffs, and progressively moving towards achievement of full cost-recovery. Sector Brief and Performance 3. The Iraqi power sector is a state-owned, vertically integrated monopoly. The Ministry of Electricity (MoE) bears direct responsibility for all operations, covering seven (7) general directorates for distribution, five (5) for transmission and six (6) for generation. 4. The power transmission sector in Iraq consists of two levels: (i) 400 kv grid (about 5200km), and (ii) 132 kv grid (about 12,500km) that links the extra high voltage grid and distribution networks 33 and 11 kv. The distribution network is mainly of the radial type, expanding from 132kV transmission substations; also known as Bulk Supply Points (BSP). The BSP substations typically consists of 132/33/11kV, with the 33kV and 11kV ones being the primary distribution voltages. These BSPs further supply 33kV distribution substations, which in turn supply the 11kV distribution networks. There are more than 3.2 million consumers of which: 41 % residential, 28 % government including state-owned enterprises, 21 % industry, and 6 % commercial, with the remainder to agricultural consumers. In 2015, the electricity supply capacity attained was about 13.5GW against a nameplate rating of 28.5GW and available capacity of about 19.11GW with an estimated system peak demand of 21.0GW. Page 1 of 9

2 5. Network Capacity Constraints. Due to years of insecurity, rehabilitation or expansion investments have slowed in the last decade leading to a dilapidated network with insufficient capacity and frequent equipment blown outs. The electricity transmission and distribution network is in critically degraded conditions and without adequate transfer capacity to meet the load demand. There is lack of adequate transmission capacity to evacuate the electricity generation from the power plant clusters to the major load centers, with the high loads in the central region (especially the Baghdad region) exceeding the available capacity to serve them. Similarly, the distribution system is also constrained by overloads and poor reliability due to lack of capacity mainly attributed to lack of spares, unplanned growth and proper system maintenance. 6. Due to the inadequacy of the national grid, on the average, the power supply availability is about 14 hours per day from the public network and Iraqis have had to rely on their own or private generation whose capacity is estimated at around 8GW with an annual estimated energy generation of about 21TWh (2012) which is equivalent to about 30% of the national grid generation. The available plant capacity is also not efficiently utilized due to a number of factors: (i) lack of spare parts and poor operation and maintenance standards leading to frequent unit outages/out of service; (ii) fuel supply shortages; and (iii) lower plant efficiencies either due to the nature of the fuel used to operate the gas turbines (gas oil, HFO and crude oil) or the type of technology (OCGT as opposed to CCGT).It is estimated that around 4GW capacity could be realized from the present installed generation capacity with improvements in the operations and maintenance combined with technology upgrades and conversions. 7. High System losses. Nearly 70% of the total electricity produced in 2013 was lost, which includes both technical, commercial and administrative losses (Transmission-6%, Distribution-13%; theft and non-billed- 23%; Non Collected 26%; and collected 33%). Over 90% of the losses are in the distribution network of which 79% are non-technical losses (theft/non-billed and non-collected). 8. Poor Revenue Management. The end-user metering in Iraq is very poor, with a combination of outdated or malfunctioning meters and widespread theft or unmetered connections. Estimates suggest that around 23% of the total electricity generated is lost to theft via illegal connections to the system. In addition, the majority of the existing end-user meters, around 80%, are more than 30 years old and some of them have never been recalibrated. The poor end-user metering is compounded by the absence of effective billing and collection systems and procedures, which in turn leads to widespread thefts, non-billing and payments. Of the estimated total system losses, about 50% is non-technical losses. 9. Unsustainable Financial Performance. The average cost of generation is estimated at about US 13.0 compared to the average tariff of about US Cost recovery remains extremely low and collected revenues are estimated to cover only 10% of the operational expenditures. Albeit the January 2016 tariff increase, and based on the annual sales of about 45TWh, the sector would still require a subsidy of about 70% (equivalent to about US$7.7 billion). In addition to the absence of a cost reflective tariff, there is no appropriate tariff methodology, which would allow the sector to move to achieve financial sustainability. Further, as a result of the fall of oil prices, Iraq s fiscal situation has deteriorated and the government s ability to provide electricity services is increasingly challenged. 10. In view of the issues highlighted in the foregoing paragraphs, the World Bank has secured Trust Fund grants to support the MoE initiate actions to improve the sector operations and supply reliability with regard to the following: a. metering supply, especially to end users, accompanied by revenue protection measures; b. an aggressive distribution loss reduction (technical and non-technical) program, c. improved cash-flow (revenue cycle) management, d. rehabilitation and improvements to the network capacity and improved operations and maintenance procedures; Page 2 of 9

3 e. generation plant efficiency improvements and merit order dispatch f. business management improvement plans (least cost investment plan, corporate business plan and bench marking and setting of key performance indicators-business benchmarking) supported by management information systems 11. Other on-going World Bank supported activities include: (i) TA for Subsidy Reforms in the Energy Sector which aims to provide GoI with an analysis on distributional impacts of subsidy reform on growth and poverty, which would serve to inform GoI s decision-making; (ii) Cost of Service and Tariff study whose objective is to establish the cost of providing electricity to various categories of consumers and separation of these costs amongst generation, transmission, distribution and supply and to evaluate different tariff structures to meet the sector revenue requirements at the same time protecting the low income consumers; and (iii) A communications strategy aimed at supporting the GoI to proactively reach-out to the public and other stakeholders, not only to solicit support on the sector undertakings and initiatives to improve the electricity service delivery, but also to have in place a set of interventions that would foster beneficiary engagement. The Bank is also preparing an investment project, the Electricity Distribution Reform and Investment Project (EDRIP) which aims to support improved electricity services provision, a reduction in large losses of electricity in the power system, and the reform of Iraq s electricity sector institutions to improve the overall performance of the sector. Objective and Scope of Services. 12. Objective. The objective of the assignment is to provide Technical Assistance support to the MoE in the preparation and implementation of a set of key interventions, both in the short and the medium terms aimed at electricity services restoration, improvements in the supply reliability and operations efficiency. 13. Scope of Services. The overall scope of the Technical Assistance is to support the MoE to improve operational efficiency and commercial performance by working with the MoE Management and Operations staff in setting up and implementation of requisite measures based on prudent utility practices and established industry benchmarks. The MoE, with grant funding from the World Bank, is seeking the services of a firm with significant experience in electricity utility operations and management, to provide technical staff to support the MoE in the following key operations aspects. a. Develop and put in place systems to ensure effective operations and coordination of generation plants operations, transmission and distribution operations and commercial operations to ensure timely, efficient and reliable service delivery to customers. b. Put in place the necessary management and operational arrangements to deliver on the achievement of MoE targets for system loss reduction. This shall include assessing the key drivers of commercial losses including, billing inefficiencies and inaccuracies, incompleteness of customer data, incomplete system data and any unethical trade practices to establish a baseline and develop loss reduction strategy and its effective implementation including but not limited to: (i) innovative business improvement approaches consistent with international best practices such as, but not limited to, contracting and outsourcing some of the business functions including identifying measurable and monitorable performance indicators that have been successfully implemented; (ii) a clear customer metering, billing and recovery framework that maximizes efficiency in revenue collection, shrinks the cash cycle and optimizes customer contact. c. Develop and put in place a generation plant operations optimization plan including merit order dispatch schedules. Page 3 of 9

4 d. Based on the available information, reviews and updates, prepare a detailed medium term (upto 2022) Sector Investment plan for the MoE to ensure timely allocation of resources and implementation of works to achieve the defined service goals and targets. e. Support to implement the defined operations and maintenance improvements to the electricity supply system to ensure efficiency in the operations of the core functions of the system in accordance with prudent utility practices and relevant standards and regulations. 14. The firm and specifically the key assigned staff, shall support the MoE to conduct a comprehensive review of the MoE technical and commercial operation cycles relative to established industry standards and prudent utility practices and establish the gaps and propose the appropriate measures to improve performance with respect to the network operations covering generation and network (Transmission & Distribution ) operational performance in the areas of planning, management, operations and maintenance and revenue management; and to identify the critical areas/aspects affecting performance with clear priorities which, once addressed will have a remarkable improvement in the performance of the MoE system operations in terms of efficiency and reliability in line with international bench marks for similar systems. The output is this review shall be a Sector Performance Assessment report with key service performance benchmarks based on established industry standards and prudent utility practices spanning, generation efficiency and plant availability; service reliability; frequency of interruptions; system losses; collection efficiency; billing efficiency, etc. 15. Key Personnel and Qualifications: The firm shall provide as a minimum the following key staff who shall be based and work with the MoE, on a full time basis, for a period of six (6) months. The MoE shall appoint counterpart staff and each key staff shall aim to adequately transfer knowledge and skills to the counterparts by the end of the assignment. Proposals with part-time staff experts or for substitutions during the course of the assignment for the key expert positions shall be considered as non-responsive. Specialized support services shall be quoted as home-office back-stopping Generation Operations Expert: Acting as an Advisor to the Director General Generation and reporting to the Deputy Minister Generation, the Expert shall support the Generation Directorate with regard to developing a comprehensive generation operations regime to optimize the use of the existing generation facilities. More specifically, the Expert will: (i) support improvements to the fuel supply chain processes within the scope of operational responsibilities of MoE s Generation Directorate; (ii) support to have in-place optimized generation plant scheduling consistent with international best practices, recognizing local constraints; (iii) provide advisory services to achievement of MoE targets of optimized cost of generation; (iv) provide oversight and direction to special studies/plans, specifically the efficiency conversions that maybe required; (v) submit monthly reports to the Deputy Minister on the progress of the assignment status. Specific Tasks. The Generation Operations Expert with back-stopping support of the home office, shall lead and undertake the following key tasks, in addition to the aforementioned general tasks Review of existing Plant Operations. The Expert, with the support of the generation department staff, will collect and review the generation plant data and performance. This shall include but not be limited to the following: (i) Station Performance reports; (ii) Annual generation & energy balance reports including associated fuel type data and efficiency, (iii) Hourly Generation by Plant; (iv) Power Plant Condition Assessment Reports; (v) Any other studies and relevant data that may be available Report- based on above, the expert with the support of the MoE, shall prepare a generation status report and associated recommendations to optimize operations efficiency and shall include but not be limited to the following: (i) Fuel supply usage and optimization; (ii) plant availabilities; (iii) heat rates; and (iv) Operations and Maintenance Costs. Page 4 of 9

5 Generation Optimization- Based on the findings and recommendations from activity above and taking into account the MoE generation plans (committed and planned) and the load demand and required reserve margin; the expert shall support the MoE to undertake generation planning studies covering the short-medium term and examine the economics and fiscal aspects of the planned generation system including the fiscal impact of delays in the implementation of the committed and planned new plants Report. Based on the review and updated generation optimization, under activities above, the expert, shall prepare a detailed generation plants operations optimization report that shall include but not be limited to the following: (i) merit order dispatch; (ii) maintenance schedules that optimize plant availability and overall minimize costs; (iii) monthly optimized fuel supply requirements. The report shall highlight the average system generation cost/kwh for each of the scenarios considered Qualifications and Experience. The Expert must meet the following requirements: Minimum of 15 years experience in generation plant operations and load dispatch functions at a utility with an installed capacity of at least 15GW mainly thermal based (HFO, gasoline and Gas); Demonstrated practical experience to effectively manage generation plants including plant dispatch optimization that maximizes the overall plant factor and availability and minimizes the total generation cost; Experience in generation plant modeling including preparation of plant screening curves and merit order dispatch. The expert must have proven record in the use of WASP software for generation planning studies; At least a Bachelor s degree in Electrical Engineering, Mechanical Engineering, or equivalent with additional qualification in generation planning and power systems economics; Good English language skills both written and spoken. Ability to communicate (oral and written) in Arabic will be an added advantage Revenue Management Expert: Acting as an Advisor to the Director General Distribution and reporting to the Deputy Minister Transmission and Distribution, the Expert shall support the distribution directorate with regard to developing a revenue management and loss reduction strategy and actions initially mainly focusing on administrative losses. Specifically, the Expert will: (i) Support improvements to the supply chain processes within the scope of operational responsibilities of MoE s Distribution Directorate; (ii) Report monthly to the Deputy Minister on the status of performance against targets (iii) Provide advisory services to achievement of MoE targets for system loss reduction, and customer outage reductions; (iv) Provide oversight and direction to special studies/plans, specifically the Technical/Commercial Losses Study/Plan; (v) Develop innovative business improvement approaches consistent with international best practices, recognizing local constraints to support rapid improvement of MoE s customer services. Specific Tasks. The Revenue Management Expert with back-stopping support of the home office, shall lead and undertake the following key tasks, in addition to the aforementioned general tasks: Revenue Management (i) Energy Data collection and analysis- collect and analyze the MoE electricity sales billing and collection data for the last 10 years aggregated per governorate per consumer category including metering data. In addition, the consultant shall collect and analyze system energy data (total generated, transmitted, distributed and billed) for the last 10 years, where available. The total distributed and billed shall be aggregated per directorate. (ii) Revenue management systems and procedures- undertake a detailed review of the entire energy sales process covering but not limited to, customer records, metering readings, billing processing, invoicing preparation, invoicing delivery, and payment collections, disconnections and re-connections, debt collection and management including the existing institutional and legal framework. Page 5 of 9

6 (iii) (iv) Based on (i) and (ii) above, undertake an assessment and analysis of the reasons and dynamics behind the current position of non-technical losses including non-payments (bad debts), illegal connections and electricity theft. The consultant shall prepare an interim report highlighting the estimated level of losses aggregated by customer category and per governorate, probable cause(s) of the problems covering metering, billing cycle, bill delivery, payment, and punitive steps if any for illegal or nonpayments. Revenue Enhancement strategy- prepare and discuss with the MoE short-term actions to improve revenue collections including measures to deter thefts and illegal connections/hook-ups to the network, as well as potential technical and institutional fixes Commercial Management Systems (i) (ii) (iii) (iv) (v) The consultant shall support MoE to take stock of and compare the metering and billing systems that are now in use and/or are planned to be implemented and develop recommendations for an optimal metering and billing system in all the governorates incorporating a state-of-art commercial management system (CMS) to efficiently carry out all commercial functions: metering, billing, collection, management of debts, attention of customers ( such as through call centers, WEB, etc.), energy balances and loss reduction, etc.. Outline a roadmap for the incorporation of a state-of-art Commercial Management System (CMS). This shall include but not be limited to outlining a new organizational structure for commercial management, including an assessment on the current organizational structure and related commercial management operational procedures, including the proposed revenue management services contracting highlighting the pros and cons of current situation. Propose a new structure and procedures considered the most adequate to achieve high quality in customer service and optimized operational efficiency, supported by a state of-art CMS, including elaborating operational procedures for commercial management, covering management of the commercial cycle (i.e. meter reading, billing and payment), including detection of billing errors on the basis of certain pre-defined parameters, automatic management of delinquent account conditions and fraudulent behavior and of associated service interruptions and punitive actions Propose a transition period ("glide path") allowing to smoothly move from current situation to the new structure and procedures for commercial management. Support the MoE to refine the scope of services and contractual obligations including key performance targets for the on-going private contracting of the revenue management and low voltage network management and operations Reports. As outputs of the specific activities above, the Expert shall prepare and submit the following specific reports: a) Non-Technical Loss Reduction Strategy Report: A summary report highlighting the estimated level of non-technical/administrative losses, probable causes and a set of recommended short medium term actions to reduce the losses including any supportive institutional and legal framework required in support of the initiatives to reduce electricity thefts and electricity debt collections. The recommended actions shall include but not be limited to : (i) Integral management of metering, reading, billing, collection, disconnection-reconnection due to unpaid bills, and inspection of meters; (ii) policies for customer service and programs for payment of old debts and commercial regularization; (iii) improvements in customer service centers; (iv) awareness communication programs to provide customers with transparent information on their rights and obligations; (iv) targeted and regular field assessments looking for irregular connections, tampered or damaged consumption meters, unmetered consumers, and (v) mechanisms and technologies to avoid theft that are less vulnerable to tampering and irregular connections. Page 6 of 9

7 b) Commercial business processes to improve management control and customer service ( Commercial Management Systems (CMS)) Report- The report shall include but not be limited to a comparison of metering and billing systems and recommendations for an optimal metering and billing strategy and a roadmap outline for developing and implementing the CMS. The metering strategy shall include but not be limited to aspects such as pre-paid consumption, spot billing, and automated meter reading and advanced metering infrastructure Qualifications and Experience. The Expert must meet the following requirements: Minimum of 15 years experience in commercial and revenue management functions at a utility with at least 3,000,000 customers, with five years in a senior management position and five years in commercial and revenue management services; Demonstrated practical experience to effectively manage provision of retail customer services to maximize revenues and service levels and minimize commercial losses; At least a Bachelor s degree in Electrical Engineering, Business Management, Finance, Economics or equivalent; Good English language skills both written and spoken; Ability to communicate (oral and written) in Arabic will be an added advantage Corporate Planning Expert. Acting as an Advisor to the Director General Corporate Services and reporting to the line Deputy Minister, the Expert shall support the MoE to develop strategies and investment plans to support the defined performance improvements in the short-medium term (up to 2022). The MoE envisages an extensive investment program targeting the rehabilitation, upgrade and reinforcement of the network assets (generation, transmission and distributions including support functions such as Enterprise Resource Planning (ERP) and Commercial Management Systems (CMS) as a part of the business plan to restore 24 hours of electricity services, improve the quality and reliability of electricity supply. As such, the Expert will support the MoE to prepare a detailed indicative sector investment plan upto In particular, the Plan will include: (a) emergency investments to be carried out in the immediate term to address critical generation and network rehabilitation needs; and (b) prioritized investments aimed at improving electricity generation and network performance in the medium term including operations efficiency as identified under the generation operations optimization and loss reduction strategy. Specific Tasks. The Corporate Planning Expert with back-stopping support of the home office, shall lead and undertake the following key tasks, in addition to the aforementioned general tasks: Definition of forecast demand scenarios (base, high, low growth) considering expected evolution of consumption of existing users and priorities defined by the Government. The consultant shall review and update (the expert shall not be required to undertake detailed simulations) the existing load forecast studies and to produce a range of load forecast scenarios using an appropriate set of variables. The update shall include a forecast of base-load, peak and intermediate power demand, with associated load shapes, for The Consultant will use and complement as needed the above work for the purposes of preparing the investment plan for network rehabilitation and upgrade Assessment of existing transmission and distribution grids, including, condition of key assets, load regime, potential overloads. As As part of this task, the Consultant will: (a) Review available studies and other documents on projected grids to identify the characteristics of the national electric system; and (b) Review in detail the optimal load flow of the existing power system and propose on this basis a clean enhanced transmission and distribution system set up (up to the BSP-132/33/11KV substations) Identification of investments (rehabilitation/upgrade of existing facilities, new assets) needed to supply existing and forecasted demand while meeting applicable criteria and standards on service reliability and quality. Under this activity, the Expert will: (a) Provide a proper methodology to identify the investments in Page 7 of 9

8 network reinforcement and other works needed to achieve an acceptable power system quality and reduce outages and interruptions to values not exceeding the applicable standards; (b) Verify that the proposed investments allow maintaining N-1 redundancy in key supply points to be agreed with the MoE Counterpart team. The Expert will also determine the needs and location for a transmission and distribution back- up system Preparation of cost estimates for the investments identified based on industry benchmarking adjusted for Iraq local conditions and environment Reports. As outputs of the specific tasks above, the Expert shall prepare and submit the following specific reports: (a) an updated abridged energy and power demand forecast report (15.3.1); (b) a system studies report (15.3.2); and (c) Sector Strategic Investment Plan covering the period upto 2022 (15.3.3&15.3.4) Qualifications and Experience. The Expert must meet the following requirements: Minimum of 15 years experience in power systems planning functions at a utility with at least an installed capacity of 10GW, with five years in a senior management position and five years in power systems analysis and planning Direct experience in power systems economics including hands-on experience in the load forecasting, power systems analysis and investment planning. At least a Bachelor s degree in Electrical Engineering and Power Systems Economics or equivalent Fluent in English. Ability to communicate (both written and oral) shall be an added advantage 16. Key Deliverables. Key deliverables shall include and by no means be limited to the following: Deliverable Within(<) (Months) Draft Final a Sector Performance Assessment report b Loss Reduction Action Plan 3 4 c Revenue Management Improvement Report (CMS) 3 4 d Generation Operations Report 2 3 e Generation operations Optimisation. 4 4 f Energy Supply Report (Updated Load Forecast) 2 3 f Sector Strategic Investment Plan ( ). 4 5 g Monthly Progress Reports to the Deputy Ministers on how the listed Monthly deliverables are being achieved. h Activity Completion Report Contracting, Supervision and Reporting Contracting. The Consultant shall be selected following the World Bank procedures and shall sign a contract for the support services with the World Bank Supervision. The Consultant key personnel shall act as key advisors to the Director Generals of the respective departments (generation, distribution and planning services) and shall report to the Deputy Ministers of Generation and Transmission and Distribution. Overall, the Deputy Ministers will have the 1 This shall serve to inform immediate key focus areas that would help restore the electricity services, increase reliability and operations efficiency in the short term. The report shall include among others key sector performance indicators and industry benchmarks based on established industry standards and prudent utility practices spanning, generation efficiency and plant availability, service reliability, frequency of interruptions, system losses, collection efficiency, billing efficiency, etc. Page 8 of 9

9 responsibility to provide guidance and ensure timely completion of relevant Government objectives under this assignment. The World Bank shall, in consultation with the MoE, regularly assess the consultant s contractual performance obligations as shall be detailed in the contract with the World Bank Reporting. The Key Experts shall submit key deliverables and reports as highlighted these ToRs to the MoE with copies to the World Bank. 18. Facilities Facilities to be provided by the MoE. The MoE shall provide the following facilities to the consultant. a) Office space at the MoE offices including office furniture and equipment and telecommunication facilities b) Access to all available relevant information, such as reports and studies, network data and operating statistics and, c) Counterpart staff and as part of training and knowledge transfer. The counterpart staff shall be paid by the MoE and the work of the counterpart staff shall be the responsibility of the MoE Facilities to be provided by the Consultant. The Consultant shall be responsible for providing all the necessary facilities to undertake the assignment including the necessary software, local transport and accommodation in Iraq to the key experts. The Consultant shall include the cost for the above responsibilities and facilities in the proposed price. 19. Implementation Schedule. As indicated above, it is estimated that the services will be provided for a period about six (6) months. The consultant shall propose and provide a schedule with breakdowns for the key experts called for in the TORs, including the Home office back-stopping services. The schedule shall provide a detailed breakdown by task, and specify key milestones and associated deliverables, and assigned personnel by name for each of the key tasks and associated expected level of effort for both field and head-office back-stopping. 20. Security. The MoE shall provide general security at the offices and escort services where deemed imperative in accordance with the overall country security provisions and guarantees. The consultant shall budget for and include in the proposal additional security costs that they consider necessary to undertake their services. Page 9 of 9