AVAILABILITY BASED TARIFF

- Tariff structures - Two part tariff - Concept of ABT - ABT structure - Expectations from OEMs/Utilities Session outline

TARIFF STRUCTURES

Tariff Structure Flat Rate- single part (p/kWh) - prior to 1991 All Costs are pass through Capacity utilisation 55% in 1975 Two part Tariff ( K.P.Rao) to 2001 Fixed Charges Variable Charges Availability Based Tariff( ABT) onwards Capacity charge Energy charge Unscheduled interchange

Two part tariff Components of Fixed Charges Return on Equity –ROE - 16% allowed Interest on Loan capital Depreciation O&M Expenses Normative –2.5 % of the current capital cost

Two part tariff Components of Fixed Charges Interest on working capital –Rate of interest is the current cash credit interest charged by the bankers –Working capital Norms Two months receivables spares for 1- year Coal stock- 15days/1 month for pit-head/others Oil Stock for 1 month Fuel expenses and O& M expenses for 1 month Taxes on income

VARIABLE CHARGES Normative and based on operational performance The Norms –Plant Load factor 4500 Hours /kW/year during stabilisation period and 5500 hours/kW/year there after (corresponds to a PLF of 62.78%) –Sp.Oil Consumption 3.5 ml/ kwh –Heat Rate 2500kcal/kwh ( 40kcal/kwh reduced for electrically driven BFPs)

VARIABLE CHARGES –Aux. Power consumption For 200MW units - 9.5% (additional 0.5% with cooling towers) For 500MW units(steam driven BFPs) % (additional 0.5% with cooling towers) For 500MW units(elec. driven BFPs) % (additional 0.5% with cooling towers) Variable cost calculated thus would be subject to monthly fuel price adjustment

Tariff Structure - Two Part Tariff  Worldly most accepted structure  Capacity charge component based upon the customer capacity utilization.  Energy charge to cover the cost of energy

THE GRID CONDITIONS PRIOR TO ABT  Wide frequency variations causing serious damages at generation & load ends.  Low frequency during peak hours, with frequency going down to 48.0 – 48.5 Hz.  High frequency during off peak hours, with frequency going up to 50.5 to 52.0 Hz.  Rapid changes in frequency – 1 Hz change in 5 to 10 minutes, for many times every day.  Very frequent grid disturbances, causing tripping of generating stations.

WHY THIS GRID INDISPLINE ?  The TWO PART tariff mechanism was not providing any incentive for either backing down the generation during off-peak hours or for reducing the consumer load by the beneficiaries and/or enhancing the generation during peak hours.  In fact, there was financial incentive in continuing with generation at higher level, even when, the load (consumer demand) had come down. This was due to the fact that incentives were linked with actual generation.

AVAILABILITY BASED TARIFF

BACKGROUND Two Part Tariff had no mechanism to impose - Grid discipline. - Market Competition - Breaking monopoly M/s ECC engaged by GOI for rationalisation. Formation of NTF and RTF M/s ECC report »Market Mechanism »Recommendation for ABT

Frequency Profile (Pre-ABT and Post ABT)

APPLICABILITY ABT is applicable to:-  All central sector generating stations (whether inter-state or intra-state), viz, the power plants of NTPC, NLC, NHPC, THDC etc.  All the beneficiaries, who draw power from central sector generating stations, viz, SEBs, Bulk Consumers having entitlements in CGS.

ABT IMPLEMENTATION STATUS IN INDIA  WR –  NR –  SR –  ER –  NER –

CONCEPT Performance criteria shifted from PLF to Availability. Introducing the concept of Re-trading Introduction of Frequency linked component Introduction of Merit order despatch

Availability Tariff Rational tariff structure for power supply from generating stations on a contracted basis.

The payment of fixed cost to the generating company is linked to availability of the plant. Amount payable to the generating company over a year towards the fixed cost depends on the average availability (MW delivering capability) of the plant over the year. Hence the name ‘Availability Tariff ’

Primary objectives of ABT a) To encourage maximisation of generation b) Deviate from the schedules and take advantage of the UI mechanism. c) Mandatory FGMO for all generating units. d) Generators are expected to operate and maintain their stations with high plant availability in a sustained manner. e) Positive deviation through the UI mechanism ensures extra power for consumers and/or enhanced optimisation / conservation of resources. e) Natural Merit order

COMPONENTS OF ABT COMPONENTS OF ABT Availability Based Tariff Mechanism has following three components:  Capacity Charge for Sent Out Availability  Energy Charge for Scheduled Generation / Drawl  Unscheduled Interchange (UI) Charge:  The Variation from generation schedules, i.e., Actual Generation (AG) - Scheduled Generation (SG)  The Variation from drawal schedules, i.e., Actual Drawal (AD) - Scheduled Drawal (SD)

AVAILABILITY BASED TARIFF AVAILABILITY BASED TARIFF The fixed cost elements relates to Capacity Charges are  Return on equity  Interest on loan  Depreciation including AAD  O&M expenses  Interest on working capital  FERV on capital cost

VARIABLE COST ELEMENTS  Energy (variable) charges cover the fuel costs and are worked out on the basis of ex-bus energy scheduled to be sent out from the generating station as per the following formula;  Energy Charges (Rs.)=Rate of Energy Charges in Rs/kWh X Scheduled Energy (ex-bus) in kWh corresponding to scheduled generation.  The components of energy charges are  Primary Fuel Cost, i.e., coal for thermal units.  Secondary Fuel Cost, i.e., oil for thermal units.

UI MECHANISM TOOL FOR INDUCING GRID DISCIPLINE ? UI TARIFF BEING LINKED WITH FREQUENCY, SENDS AN APPROPRIATE COMMERCIAL SIGNAL TO GENERATORS & STATES DEPENDING UPON THE GRID FREQUENCY ALLOWS THEM TO TAKE CORRECTIVE ACTION AND BRING THE FREQUENCY NEAR THE NOMINAL LEVEL.

FEATURESOF ABT FEATURES OF ABT  Capacity Charge and Energy Charge do not depend on PLF of the station and actual generation/drawal respectively.  No complications w.r.t deemed generation.  No year end commercial adjustments.  Perpetual Incentive for maximizing generation and reducing drawal during peak load conditions.  No incentive to over generate during off-peak conditions.

TERMINOLOGY Availability : in relation to a thermal generating station for any period means the average of the daily average declared capacities (DCs) for all the days during that period expressed as a percentage of the installed capacity of the generating station minus normative auxiliary consumption in MW, and shall be computed in accordance with the following formula: N Availability = x Σ DC i / { N x IC x (100-AUX n ) }% i=1 where, IC = Installed Capacity of the generating station in MW, DC i = Average declared capacity for the i th day of the period in MW, N = Number of days during the period, and AUX n = Normative Auxiliary Energy Consumption as a percentage of gross generation;

TERMINOLOGY Declared Capacity (DC): The capability of the generating station to deliver ex-bus electricity in MW declared by such generating station in relation to any period of the day or whole of the day, duly taking into account the availability of fuel

TERMINOLOGY Plant Load Factor(PLF): The total sent out energy corresponding to scheduled generation during the period, expressed as a percentage of sent out energy corresponding to installed capacity in that period and shall be computed in accordance with the following formula: N PLF = x Σ SG i / {N x IC x (100-AUX n ) }% i=1 where, IC = Installed Capacity of the generating station in MW, SG i = Scheduled Generation in MW for the i th time block of the period, N = Number of time blocks during the period, and AUX n = Normative Auxiliary Energy Consumption as a percentage of gross generation;

TERMINOLOGY Unscheduled Interchange (UI) Charges: Variation between actual generation or actual drawal and scheduled generation or scheduled drawal shall be accounted for through Unscheduled Interchange (UI) Charges. UI for a generating station shall be equal to its actual generation minus its scheduled generation. UI for a beneficiary shall be equal to its total actual drawal minus its total scheduled drawal. UI shall be worked out for each 15 minute time block. Charges for all UI transactions shall be based on average frequency of the time block UI rates are frequency dependent and uniform throughout the country.

UI SHALL BE BASED ON THE AVERAGE FREQUENCY OF THE RELEVANT TIME BLOCK. AVAILABILITY BASED TARIFF - UI

AVAILABILITY BASED TARIFF - UI AVAILABILITY BASED TARIFF - UI  if a power plant delivers 1934 MWs, while it was scheduled to supply only 1800 MW, the energy charge payment would be for 1800 MW only, i.e., for scheduled generation only.  The excess generation, i.e., 134 MW in above example would be paid for at a certain rate known as Unscheduled Interchange (UI) Charge, which would depend upon the system conditions prevailing at that time.  If the grid has surplus power at a particular time and frequency is above 50.5 Hz, the energy rate (for extra power) would be nil. If the system frequency is between 50.5 – 49.8, the rate would be small, i.e., varying from 6 paise per unit to Rs per unit depending upon the system frequency. However, if the system frequency is between 49.8 – 49.0, the rate would be high, i.e., varying from Rs per unit to Rs per unit.

CAPACITY CHARGE Related to ‘availability’ of the generating station and the percentage capacity allocated to the state. ‘Availability’ for this purpose means the readiness of the generating station to deliver ex- bus output expressed as a percentage of its rated ex-bus output capability.

ENERGY CHARGE Energy charges shall be worked out on the basis of a paise per kwh rate on ex-bus energy scheduled to be sent out from the generating station as per the following formula Energy charges = Rate x Scheduled Generation (ex-bus)

CGS-2 CGS-1CGS-3 BULK CONSUMERS SEB/SLDC 1 SEB/SLDC 2SEB/SLDC 3 inter state IPPs REGIONAL GRID RLDC Controls CONTROL AREA UNDER ABT FOR RLDC

CENTRAL GENERATION STATE THERMAL REGIONAL GRID STATE HYDRO BULK CONSUMERS DISCOM 1 DISCOM 2DISCOM 3 STATE IPPs CPP STATE GRID SLDC CONSUMERS CONTROL AREA UNDER ABT FOR SLDC Controls

Scheduling Process Day ahead By 10 AM, RLDC collects the plant-wise ex- Bus MW capability of ISGSs for the next day By 11 AM, RLDC advises SEBs, on a 15 minutes blockwise level, their entitled MW shares from each ISGSs’ availability By 3 PM, RLDC receives block-wise MW requisition from SLDCs and also the schedule of bilateral exchanges, if any By 5 PM, RLDC issues ‘despatch schedules’ for ISGSs and ‘net drawal schedules’ for SEBs, 15 minutes block-wise for the next day starting at midnight. Upto 10 PM SLDCs may inform any change of the above or bilateral exchanges to RLDC, if required by any new development during the day. At 11 PM Schedules are frozen for the next day. RLDC issues final drawal schedules to each State & Despatch schedule to each ISGS.

REVISIONOF SCHEDULES / REQUISITIONS REVISION OF SCHEDULES / REQUISITIONS Revision of schedules are permitted due to contingency such as:-  Outage of generating unit.  Revised declaration of availability by CGS.  Outage of a transmission element.  Unforeseen load-crash.

REVISIONOF SCHEDULES / REQUISITIONS REVISION OF SCHEDULES / REQUISITIONS Revision takes effect from:-  4 th Time Block in case of  Forced outage of a generating unit  Transmission constraint  Grid disturbance  Suo Moto revision by RLDC, in the interest of grid stability  6 th Time Block in case of  Revision of declared availability by CGS  Revision by beneficiaries due to unforeseen load- crash

Tripping of 500MW unit Tripping of 500MW unit

Stopping of 500 MW unit

SPECIAL ENERGY METERS (SEM)  To implement ABT, Special Energy Meters (SEM) have been provided at the following locations  At generating stations - main & check meters on the outgoing feeders from the generator SEM can record:-  Average frequency for each 15 minutes time block.  Average net energy transmitted for each 15 minutes time block.  Cumulative net energy transmitted.

NATURAL MERIT ORDER

Further benefits expected UI mechanism For the intra-State stations State stations would respond to grid conditions Higher power availability during peak-load hours Reduced load shedding

How to bridge Demand - supply gap Harnessing the existing captive and co-generation power into the grid and pay as per the frequency-linked UI rate. The State would financially gain with respect to regional grid at the prevailing UI rate. UI is a very versatile mechanism. It can even be applied for non-conventional generation (solar, bio-mass, wind, mini-hydel) to gainfully harness the capacity, which may not come into the grid otherwise.

OPTIMUM UTILIZATION OF INTRA - STATE RESOURCES Actual net drawal exceeds the net drawal schedule the State has to pay UI charges. This liability can be reduced by restricting the overdrawal, particularly when frequency is below normal. This in turn requires maximization of output from all intra-State stations, which means that there is a pressure on each State as well for perpetually enhancing the availability of all intra-State stations In the absence of Availability Tariff for intra-State stations, these stations have no direct incentive acting on them for maximizing their availability.

IMPROVEMENTS BROUGHT BY ABT  Quantum improvement in system parameters  Grid frequency  Voltage profile  Innovative methods in system operation  Pump operation at Kadampurai  Re-arrangement of electrical loads  Optimal utilization of reservoirs  Condenser mode operation of Idukki  Inter regional trading  Win-win situation for both regions  Opportunistic UI transaction

Expectations from OEM High Reliability Least equipment down time For High Availability of equipments : Maintenance of High Quality Standards while manufacturing, erection & Commissioning Adhering to the Free governor mode operation

Expectations from Generators & Grid Operators Ensuring Reliable power with high availability specifically during peak hours Demand side Management

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