Uzbekistan: Advanced Electricity Metering Phase 4 Project

Sovereign Project | 41340-015

Summary

The project will install an advanced electricity metering (AEM) system that uses modern, accurate, and tamper-proof revenue meters for the power grid system and end-users in five regions (Andijan, Fergana, Kashkadarya, Namangan, and Surkhandarya) to complete the nationwide rollout of AEM. The project will promote energy efficiency in power distribution by reducing commercial losses and improving the efficiency of electricity revenue collection. The installation of 3.1 million meters, integrated meter-to-cash solutions, and a capacity development component will help Uzbekenergo and its customers effectively adopt and utilize the new technology.

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Project Name Advanced Electricity Metering Phase 4 Project
Project Number 41340-015
Country Uzbekistan
Project Status Proposed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan: Advanced Electricity Metering Phase 4 Project
Ordinary capital resources US$ 300.00 million
Uzbekistan Fund for Reconstruction and Development US$ 70.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Partnerships
Sector / Subsector Energy - Electricity transmission and distribution
Gender Equity and Mainstreaming Effective gender mainstreaming
Description

The project will install an advanced electricity metering (AEM) system that uses modern, accurate, and tamper-proof revenue meters for the power grid system and end-users in five regions (Andijan, Fergana, Kashkadarya, Namangan, and Surkhandarya) to complete the nationwide rollout of AEM. The project will promote energy efficiency in power distribution by reducing commercial losses and improving the efficiency of electricity revenue collection. The installation of 3.1 million meters, integrated meter-to-cash solutions, and a capacity development component will help Uzbekenergo and its customers effectively adopt and utilize the new technology.

The impact will be improved financial viability in the power sector. The project will help ensure (i) accurate accounting and billing of energy, (ii) commercial loss reduction, and (iii) improved energy efficiency. The outcome will be the improved electricity revenue collection in the targeted regions. The project will cover Andijan, Fergana, Kashkadarya, Namangan, and Surkhandarya regions. The project will improve metering accuracy, billing efficiency, and tariff collection rates; and provide anti-tampering and fault-detection capability to Uzbekenergo.

Project Rationale and Linkage to Country/Regional Strategy

The economy has sustained high growth, averaging 8% in 2010-2014. Growth in 2015 and beyond is expected to remain above 7%. The Government of Uzbekistan prioritizes modernizing industry and developing infrastructure and the private sector. Reliable and affordable electricity supply is vital to achieving these goals. One of the key challenges is the high level of losses in the power sector. The State Joint Stock Company Uzbekenergo, a vertically integrated state-owned utility, reported system losses of over 18% in 2014, with transmission losses at 4% and distribution losses 14%. Revenue collection rate was also low, at 80% or less. These reported losses may be understated because of Uzbekenergo's inability under its current system to accurately collect information about the amount of electricity supplied and to monitor the revenue collection.

The economy has sustained high growth, averaging 8% in 2010 2014. Growth in 2015 and beyond is expected to remain above 7%. The Government of Uzbekistan prioritizes modernizing industry and developing infrastructure and the private sector. Reliable and affordable electricity supply is vital to achieving these goals. One of the key challenges is the high level of losses in the power sector. The Joint Stock Company Uzbekenergo, a vertically integrated state-owned utility, reported system losses of over 18% in 2014, with transmission losses at 4% and distribution losses at 14%. Revenue collection rate was also low, at 80% or less. These reported losses may not be accurate because of Uzbekenergo's inability under its current system to accurately collect information about the amount of electricity supplied and to monitor the revenue collection.

The high level of electricity losses comes from the lack of investment in modern distribution assets and outdated manual operations, which results in inaccurate, unreliable, and inefficient revenue collection. Electricity meters are generally old and are in service beyond their designed economic life without proper recalibration. They are inaccurate and susceptible to tampering. Without proper grid metering, Uzbekenergo faces difficulty in accounting for electricity supplied and used. Manual billing systems leave room for potential collusion between customers and tariff collection officers. Incentive mechanisms to reduce losses are not sufficiently institutionalized.

To overcome these challenges, Uzbekenergo has requested international financial institutions to finance a nationwide AEM program. AEM or smart metering allows two-way communication between the utility and customer meters. AEM enables the utility to remotely disconnect and reconnect supply without having to send utility officers to the site. This function removes the human factor in meter reading and reporting, thus enhancing disincentives for meter tampering and customers who do not make full payment on time. AEM provides more accurate power usage information, which helps customers manage their electricity consumption and improve energy efficiency, and empowers the utility in identifying losses in the distribution system. The remote monitoring capability also enables the utility to prevent overloading of the distribution system and, as a result, technical losses may be reduced.

The introduction of AEM is one of many efforts being undertaken by Uzbekenergo to improve the sector's efficiency and performance, and it is a priority project under the government's long-term investment and structural reform program (2015 2019). Uzbekistan has 13,500 megawatts of installed capacity, of which 85% is thermal power. Concurrently, old inefficient power plants are being replaced by energy-efficient combined-cycle gas turbines. The electricity tariff has been steadily rising to support financial sustainability and cost recovery. Financial transparency has improved, with ADB assistance, since Uzbekenergo adopted external audits based on the International Standards on Auditing from FY2011.

Uzbekenergo aims to cover 6.3 million customers with AEM. It initiated its first large-scale AEM project financed by ADB for 1 million customers. Implementation of the first project has been satisfactory, although procurement has taken longer than expected because AEM systems are complex and new to the country. To complete the nationwide rollout of AEM, Uzbekistan has requested ADB to finance the project to cover five regions.

The project is in line with ADB's country partnership strategy for Uzbekistan, which includes a focus on energy efficiency and reliable power supply. The project is included in ADB's draft country operations business plan for Uzbekistan, 2016 2018.

Impact Power sector financial viability improved (National Investment Program: 2015-2019).
Outcome Electricity revenue collection in the targeted regions improved.
Outputs

1. AEM infrastructure installed and functional.

2. Operations manual adopted and loss reduction operations strengthened.

3. Customer service for end-users improved.

Geographical Location Andijan, Ferghana, Namangan, Kashkadarya, and Surkhandarya
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects No major environmental safeguards issues are envisaged for this project.
Involuntary Resettlement No major issues on involuntary resettlement are envisaged for this project.
Indigenous Peoples No major issues on indigenous peoples are envisaged for this project.
Stakeholder Communication, Participation, and Consultation
During Project Design Stakeholders' consultations through community meetings, discussions, and interviews will be conducted during the PPTA. Strategies to encourage poor women's participation as individual consumers or as representative of interested groups will be encouraged.
During Project Implementation Community meetings, discussions, and interviews. Women leaders in government and business will be involved to participate in the consumer education campaign. At the same time, Uzbekistan has a number of NGOs with whom the project may work on end user awareness raising. The PPTA will prepare a shortlist of relevant NGOs.
Business Opportunities
Consulting Services Uzbekenergo will engage a (i) Project management and supervision consultant (consulting firm) using quality-cost based selection (90:10) for 310 person-months; and (ii) External auditor using consultants' qualification selection for 30 person-months.
Procurement Uzbekenergo will employ turnkey contractors (two lots) for the AEM system for Andijan, Ferghana, Kashkadarya, Namangan, and Surkhandarya regions, using ADB's single-stage, two-envelope bidding procedure. The contractor will provide related services to Uzbekenergo such as training, trouble-shooting, and the customization and installation of the system. The installation of meters will be undertaken by the Uzbekenergo personnel, under the supervision of the contractors and the project supervision consultant.
Responsible ADB Officer Keiju Mitsuhashi
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Energy Division, CWRD
Executing Agencies
UzbekEnergoZafar Karimov, Project Manager6 Istiklol Street Tashkent, 100000, Uzbekistan
Timetable
Concept Clearance 05 Jun 2013
Fact Finding 18 Feb 2015 to 27 Feb 2015
MRM 22 Jun 2015
Approval 18 Sep 2015
Last Review Mission -
Last PDS Update 26 Mar 2015

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