1. 1 APPROPRIATE PRICING OF TRANSMISSION A PRESENTATION BY SRLDC, BANGALORE

2. 2 OBJECTIVES  Allocate embedded (fixed) costs equitably Based on cost causation Based on usage  Allocate embedded (fixed) costs on a non- discriminatory basis Between new and existing users Between jurisdictional and non-jurisdictional users  Send ‘correct’ price signals Encourage production (short-term) efficiency Encourage expansion (long-term) efficiency (gen. and trans.)

3. 3 What are we trying to recover? FIXED COSTS Existing system costs –Should be shared by all? –New players (Firm/Non-firm) to be exempted? –Usage based / Access based? OTHER COSTS Operating cost Opportunity cost Reinforcement cost

4. 4 PARADIGMS Mainly focused at recovery of fixed/ (embedded) costs Two fundamental types –Access charges –Usage charges Two fundamental methods –‘Rolled in’ method –‘Incremental’ method

5. 5 Validation Criteria Will it make the cost of power cheaper? Will it accelerate trading and competition? Is it fairer to existing stakeholders? We have just moved from usage based system to access based system ……Should we change again? Is light user subsidising heavy user an issue? Do we get quantum economic gain to justify this change? Will it give a stronger signal for investment in transmission and generation siting? Will there be consensus amongst stakeholders?

6. 6 Validation Criteria Will it complicate bookkeeping without commensurate benefits? Is our market mature enough? Do we have acute congestion problems? Have we exhausted all our reserves?

7. 7 Is there a ready solution? Networks in India yet to mature Not as enmeshed as in other developed countries As of now open access in Indian context is for the reserves in transmission Private participation in transmission is minimal Should encourage growth in the Power Sector A Ready solution may not be suitable…… ….It has to be tailored to our requirements

8. 8 What needs to be done Simple to implement and easy to understand system Compatible with settlement system of ABT Should not influence/complicate dispatch No change for existing customers Stop free rides (Bilaterals) Charge all ‘open access’ customers reasonably Incentivise counter flows Price should be ‘region wise’ rather than ‘zone wise’ Should have ‘self-healing’ properties Should satisfy ‘pool-stability’ properties Connection charges for Merchant generators to access spot(UI) markets Metamorphose with maturing Grid condition

9. 9 Trading and Market Present scenario ‘Open Access’ in ISTS already in vogue –PTC, Goa – DTL, Nly-Pondy trades in place Day ahead (Scheduling) market in place –Achieved through ABT Balancing market (UI) already operational Transmission charge recovery – Paradigm shift:- –From ‘usage’ based (Pre-ABT) to ‘Access’ based (Post-ABT- based on allocations)

10. 10 A Probable solution For existing transmission facilities including reserves the present method of ‘access’ charge with prudent wheeling charges for bilateral and open access customer should suffice. Signal to be generated for new investments in transmission as need is felt Tariff should be Regional for now.

11. 11 A Probable solution Marginal loss pricing Existing customers have paid for transmission system Transmission reserve is non-firm Use of transmission reserve does not entail any extra cost – Hence no transmission charge for ‘open access’ customer. Such transactions induce marginal losses – which needs to be compensated

12. 12 A Probable solution Marginal loss pricing. Contd….. Marginal losses to be assesed through load flow studies by RLDC’s Corridor available on ‘first-come-first-served’ basis Counter flows go free Curtailment on ‘highest marginal loss’ basis Advantages Simplicity – No complicated billing, computations etc… Merit order not distorted Increasing Marginal losses give signal for augmentation Decongesting contracts are encouraged Region-wise concept – inline with investment, settlement etc.

13. 13 IMPACT ON RLDC More players –Scheduling process becomes complex –Many schedule revisions –More load flow studies Evacuation Stability RLDC should be compensated for the extra efforts/Manpower/Equipment –Charges for conducting Load flow along with trade proposal –Scheduling and revision charges for actual trades

14. 14 Inter-Regional Transfer Capability ≈4000 MW 280 SEM Meters UI Market ≈ 30-40 Cr Every month Installed Capacity ≈28500 MW 15 Power Entities Dynamic Grid Conditions Complexities in managing ‘Open Access’ in Southern Region Generators –Hydro, Thermal,Gas/IPP 412 nos. 806400 SEM Readings Every month OPEN ACCESS

15. 15 References.. 1.Comparison of transmission tariff methods in a free market for electricity P. Van Roy T. Van R. Belmans D. Van Dommelen G. Pepermans S. Proost 2.A postage stamp transmission tariff with marginal loss based incentive Peter Van Roy, Ronnie Belmans 3.MW-Mile Charges: Do They Work? Steven Stoft 4.Cost of Transmission transactions : An Introduction Dariush Shiromohammadi, Chitra Rajagopalan and other 5.Concept paper open access in inter-state transmission August, 2003 CERC 6.Market Operations in Electric Power Systems –Mohammad Shahidehpour 7.Making Competition work in electricity – Sally Hunt 8.Designing markets for electricity – Steven Stoft 9.Some fundamental technical concepts about cost based pricing.. Dariush Shiromohammadi and others 10.Allocation of transmission fixed charges –An overview …J.W.Marangon Lima 11.Study of bulk power and transmission tariffs and transmission regulation…ECC 12.Various resources from the WWW