CERC Paper on Open Access Presentation by the MPERC Bhopal At New Delhi 25 September 2003.

CERC Paper on Open Access

Presentation by the MPERC Bhopal

At New Delhi

25 September 2003

Madhya Pradesh Electricity Regulatory Commission2

In this presentation

The Open Access Paper– Pricing design objectives – Existing Scenario– Open access transmission tariff– Methodology and procedure– Energy accounting

Other Discussion Points

Objective(s) of the Paper: 1. To generate a debate on the important issues

a. Identification of key issuesb. Understanding the implicationsc. Understanding stakeholder perspectives

2. Frame regulations


Transmission Pricing DesignDefinition of Objectives (3.1)

Objectives defined in the Paper– Efficiency of operations and trading– Efficient use of resources– Signal for investment– Signal for location of generation/load– Compensate owner of the wires– Simple and practical

Comments on Objectives– Agree– Agree– Agree– Agree– Agree– Agree– Ensure safety of grid (Needed for all

users)– Provide regulatory certainty (For overall

development of the power market and removal of uncertainty to attract investors)

– Provide level playing field (To new transmission utilities and transmission users)


Existing ScenarioRole of the CTU (2.1), CTU Tariffs (2.2)

Proposals– Current lines based on BPTA’s– Open access only for spare capacity– “Existing transmission agreements will have to

be honored…” for current and future lines built

on BPTA’s

Comments– Agree that open access only for spare capacity– Agree that existing arrangements should be

honored.

– Who is the successor entity to SEB –

State Trader / STU / DICSOM’s?

Division ratio?– What when a BPTA expires, say at the end of 5

years? Consider as Open Access.

Proposals– TSC apportioned based on CGS allocation– Spare capacity paid for by beneficiaries– Open access will reimburse them partially

Comments– Need to decide who pays for unapproved

expansion of system.

– Transmission pays: Transmission

should not be allowed to take

uncovered risks

– Beneficiary pays: In effect he is

subsidizing later users. Preferable.– Relevant Commission must approve the

excess investment in capacity at a certain

margin above what is immediately required


Open Access Transmission TariffAlternatives (4.1)

Contract path– May be adopted for those transactions where clear line of power flow can be

determined. Exhibit.

Contract Path

Contract PathB

SellerExporting Region

A

CBuyerImportin

g Region

IPS

IPS

Incremental postage stamp method– Adopt for places where clear lines cannot be determined.– Minimum charge should be fixed for use of transmission facility for very small

distances– Grid support charges also to be levied


Open Access Transmission TariffPricing Philosophy (4.2)

Proposals– Ceiling on an all-India basis: Purpose is to

provide a signal for location of lines and transmission system users.

Observations– Purpose of allowing market forces to

operate and create correct economic signals for siting of generation, loads and new lines may not be adequately met

Region

Total TSC

(Rs. Crores)

Ckt-km

Unit TSC

(Rs / km / MW /

Month)

Incremental Postage Stamp Charge

NR 97.06 12525 154.99 2.16

WR 43.40 9168 94.68 1.32

SR 77.15 6847 225.35 3.14

ER 19.13 4752 80.51 1.12

Total 236.74 33292 142.22 1.98

Suggestions– Different postage stamps for different

regions– Concern: Determination of IPS For cross-

regional squares


Open Access Transmission TariffPricing Philosophy (4.2)

Proposals– Levy on capacity reservation

Observations– Paper proposes that open access ceiling

be determined assuming average loading of 500 MW as per Annexure I.

– This benefits open access users at the cost of “original beneficiaries”

Comments– Disincentive to BPTA!– Ceiling should be higher than derived

as above– Apply percentage markup – Alternative method may be used for

determination of OA-TSC ceiling based on actual loading and not total line capacity

1. Power flowLines capacity 500 MWFirm Usage 300 MWSpare 200 MWOpen access usage 100 MWIdle capacity 100 MW2. CostsCost (Transmission Charges - TC - for the month) 200 Crores

Unit TSC (Rs. / MW / Month) 0.4(As per proposed method = TC / 500 MW)

Evaluation : Ben - A Ben - B Pure OAAssuming 2 "original" beneficiaries with ratios 0.5 0.5 - Firm usage (MW) [Ratio X Total Firm Usage] 150 150 - Cost incurred for firm transmission (TC / Capacity) 100 100 -

Open access usage (MW) - 50 50 Cost incurred for open access (OA Capacity * Unit TSC) - 20 20 Refunds (OA Income divided among "original benef.") 20 20 - Effective charge 80 100 20 Charge per MW 0.53 0.50 0.40

Assumptions:

Derivation of open access ceiling charge :


Open Access Transmission TariffSharing of TSC (4.6), LD Charges (4.7)

Sharing of TSC among beneficiaries (4.6)

Proposals– TSC to be apportioned to regions based

on CGS generation capacity

Comments– Inter-regional TSC should be apportioned

to regions based on BPTA share from CGS plus share of IPP’s

Sharing of LDC charges (4.7)

Proposal– Total LDC charges to be calculated from

the weekly LDC charges divided by installed capacity of CGS = 200 rupees per week per MW = 0.12 P/U

– Revenue to go to reduce costs to original beneficiaries / successors

Comments– Treat all as equal– Bill original beneficiaries also on a weekly

basis– Weekly LDC charges should be divided

by total generation capacity scheduled to be handled in the week = CGS + IPP + Traded power


Methodology and ProcedureInformation Systems (5.1)

Proposals– Hourly updating of information – Dissemination over the Internet or other dedicated communication channel

Comments– Incorporate mechanism for advance declaration of available capacity. This will allow

users to plan for open access and a move towards the development of a spot and futures market.

– Frequency of advance declarations:

– Twelve months ahead spare availability information– Week ahead in hourly blocks– Day ahead in 30-minute blocks– Information updating frequency: 30 minutes for actual values in real time.

– Dissemination of information:

– Centrally at NLDC / RLDC’s in tandem– Dedicated communication channels connecting central database, traders,

distribution licensees, transmission utilities. – Information may also be posted on the Internet


Methodology and ProcedureNodal Agency (5.2, 5.4)

Proposed: – Processes all applications on FCFS– In order of priority of service

Suggestions: Options may be considered– FCFS.– Bidding.– Beauty Contest. Who judges in case of beauty contest?– Mix of the above.

– What would be an appropriate mix?

– A pecking order should be defined


Methodology and ProcedureSpecial Energy Meters (5.8) and Creditworthiness (5.11)

Special Energy Meters (5.8)

Proposals: – As and when required, open access

customer will have to install required special energy meters

Suggestions: – May be an expensive proposition for

small customers.

Credit worthiness (5.11)

Proposals:– Prospective open access consumer

must establish credit-worthiness

Suggestions: – Establish creditworthiness to whom?

CERC / RLDC– What shall be the measurement

basis for creditworthiness?– Creditworthiness of SEB’s very low– Alternatives to measurement of

credit-worthiness: Security deposit, margin money, LC, bank guarantee, advance


Methodology and ProcedureTypes of Service (5.13), Priority of Allotment (5.15) and Penalty for Hoarding (5.16)

Types of Service (5.13)– Need to clearly define Firm and Non-Firm. Also, consider number of hours per day.– What is the treatment for Non-Firm agreement longer than 1 Month?– Need to outline difference of charges for Firm and Non-firm power transmission

Long Term >= 1 Y

ShortShort Medium Term: 1 M – 1 Y

Short Term: 1 W – 1 M

1 W – 1 M

1 D – 1 W

1 H – 1 D

{{

Firm Service

Non-Firm Service

Priority of Allotment (5.15)

Proposals:– Hierarchy defined.

Suggestions: – Agree

Penalty for Hoarding (5.16)

Proposal:– CERC to act on complaint.

Suggestions: – Suggest periodic review


Methodology and ProcedureCurtailment Due to Constraints

Proposal– Non-Firm users before Firm users– Short-Term users before Long-Term

users1. What if there are two consumers of the same level in

pecking order, and one is paying more or offers to pay more? What considerations for payment history?

2. Why should open access original beneficiaries be the last to be disconnected? Why should they not be treated at par as far as their open access portion is concerned?

1

2

3

4

5

6 >= 1 Y

1 M – 1 Y

1 W – 1 M

1 W – 1 M

1 D – 1 W

1 H – 1 D

{{

Firm Service

Non-Firm Service

Money:The Third Dimension

Suggestion– Pecking order outlined as below.– What is the treatment of Non-Firm agreement

longer than 1 Month?

Define an order considering 1. Firm / Non-firm, 2. Duration and 3. Price Paid

Define an order considering 1. Firm / Non-firm, 2. Duration and 3. Price Paid


Energy AccountingActive Energy (6.1), Reactive Energy (6.2) and Energy Loss (6.3)

Active Energy (6.1)

Proposals– Direct CTU users to comply with ABT– Embedded customers to comply with Intra-State

ABT– For embedded customer, STU / SEB to be billed

Suggestions– Fix a minimum threshold for applying ABT

(1. Avoids complexity, and 2. saves customer the cost of Special Energy Meters)

– Dependent on whether and when State implements ABT

– STU should not be billed because it is a pure wires company and has nothing to do with users of its wires adhering to schedules.

– Consider billing the SLDC (1. Incentive for SLDC to perform, 2. May be difficult since SLDC is non-profit). SLDC may pass on to embedded customers or deduct from margin money / advance

Reactive Energy (6.2)

Proposals– Apply to direct CTU customers– Not appropriate to apply to embedded customers

Suggestions– SERC’s shall decide whether to apply to since it

impacts the State system– May have very high cost implications for smaller

open access consumers

Energy Loss (6.3)

Proposals– Measure past weeks losses and apply to ensuing

week.

Suggestions– Agree. Simple, easy to implement and accurate– Consideration for incremental postage stamp

application of losses. It is complex and not necessarily accurate.


Additional Discussion Points

Scheduling of direct contracts– Will direct contracts be incorporated into the ABT mechanism?– If yes, above what threshold level of MW contract?– If not, how will any variability on account of them be reconciled with ABT billing?

ABT in case of bilateral agreement / Dishonoring of bilateral agreement– A and B enter into agreement for 50 MW– How will ABT apply to A and B? – Case 1: A feeds the power, B does not draw fully– Case 2: A does not feed power, B continues to draw– Clear need to outline mechanism for settlement

– Wheeling charges

– Energy Accounting

Assessing transmission capacity (Section 5.2)– Uniform mechanism should be adopted by all constituents– CERC may like to outline assessment mechanism

Surcharge (4.9): – How will CERC determine surcharge?– Loss incurred by State utilities – SERC should decide.

MP Electricity Regulatory Commission


Open Access Transmission TariffPricing Philosophy – Regional Ceilings

TSC in ER = 10TSC in SR = 41Total TSC = 51

Signal to generators:Move towards SR to reduce number of expensive SR zonesEffect:Generation moves towards load

Signal to transmission utilities:Invest in SR since there is more income to be made. Effect: This will reduce the SR postage stamp.

SR ER

Signal to load:Invest in ER since TSC costs are lower. Effect: Load moves towards generation

TSC in ER = 18TSC in SR = 26Total TSC = 43

Generation

Load


Open Access Transmission TariffPricing Philosophy (4.2) – 1





Assumptions:


CERC Paper on Open Access Presentation by the MPERC Bhopal At New Delhi 25 September 2003.

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Transcript of CERC Paper on Open Access Presentation by the MPERC Bhopal At New Delhi 25 September 2003.