YEARS OF INCORPORATION

TNEB : 1957 (56 years old)NLC : 1956 (57 years old)NTPC : 1975 (38 years old)Powergrid : 1989 (24 years old)

ELECTRICITY ACTS

• Indian Electricity Act, 1910, • The Electricity (Supply) Act, 1948

• The Electricity Regulatory Commissions Act, 1998 – CERC AND STATE ERCs

• THE ELECTRICITY ACT, 2003 De-licensing of Generation , Non-

discriminatory open access , Power Trading , Tariff Regulations of ERCs

and Tariff Policy and National Electricity Policy of GOI etc.,

STRUCTURE OF THE ELECTRICITY SUPPLY INDUSTRY

• The Electricity Supply Industry comprises mainly of:

Generation Transmission Distribution

GENERATION

TRANSMISSION

DISTRIBUTION

NTPC, NHPC,NPCIL, IPPs, and

SEBs

Licensees likeBSES, NDPL,TATA , SEBs

PGCIL AND SEBs & Licensees

FLOW CHART OF THE ELECTRICITY SUPPLY INDUSTRY

TRANSMISSION OF ELECTRICITY

• TRANSMISSION : Transmission of electricity is defined as the bulk transfer of power at high voltage (132KV and above) over long distances.

• A power transmission system is referred to as GRID

The grid consists of two types of infrastructures:High voltage transmission system for transporting power

over long distances (AC & HVDC)

Lower voltage distribution systems.

GRID SYSTEM IN INDIA

STRUCTURE OF POWER TRANSMISSIONIN INDIA

India has two types of transmission companies –Central Transmission Utility

(CTU) State Transmission Utilities

(STU)CTU is responsible for

transmission between states and between regions

STUs are responsible for transmission within states.

Private Transmission Licensees

GROWTH OF POWER TRANSMISSIONIN INDIA

The transmission system in India was developed according to the growth in power generation capacityThe 220KV power transmission was

introduced in 1960 400 KV was introduced in 1977HVDC (back to back) and HVDC bi-

pole transmission were set up in 1989 and 1990 respectively.

765KV/1200KV schemes recently commissioned/ under commissioning

• The country has been divided into five regions for transmission systems, namely Northern, North Eastern, Eastern, Western and Southern

• October 1991 - Eastern and the Northeastern regional grids were synchronized

• March 2002 West synchronized with the above mentioned regional grids through AC lines (Central Grid).

• In August 2006 North synchronized with the Central grid, to form the

NEW grid. • There are five regional grids and two freq

• In 2014, the whole of India will operate as a single grid with the SR grid synchronised with the NEW grid.

GRID SYSTEM IN INDIA

TRANSMISSION PRICING (ISTS)

• TRANSMISSION : ISTS Transmission assets are common to many players and usage based pricing is important.

• PRICING: Deciding the amount to be paid for such transfer of power

• Pricing mechanism must be able to capture the utilisation and charge for the resources being utilised.

PRICING PROCESS

• Pricing nechanism involves two distinct processes:

Determination of Transmission Charges (Servicing the

investments)

Sharing of Transmission charges among the beneficiaries (many use)

DETERMINATION OF TRANSMISSION CHARGES

• GOI Notifications dated 1992 and 1997

• CERC formed in 1999• CERC Regulations on Terms

and Conditions of Tariff 2001,2004,2009. Cost Plus Approach (Sec

62) Adoption of Tariff (Sec 63)

COST PLUS APPROACH

YEARLY TRANSMISSION CHARGES AS PER CERC REGULATIONS ON TARIFF DETERMNATIONRETURN ON EQUITYINTEREST ON LOANDEPRECIATIONO AND M EXPENCESINTEREST ON WORKING CAPITAL

HISTORICAL BACKGROUND

METHODS OF TRANSMISSION PRICING

METHODS OF TRANSMISSION PRICINGMW- MILE METHODPOSTAGE STAMP METHOD (ZONAL,

INCREMENTAL , NATIONAL, REGIONAL)

CONTRACT PATH METHODLOCATION BASED MARGINAL

PRICING ETC,. THESE METHODS HAVE BEEN

TRIED IN DIFFERENT COUNTRIES

REGIONAL POSTAGE STAMP METHOD

• In India, till 2011, allocation mechanism of sharing transmission charges was based on regional postage stamp system / method

• All States in the Region were sharing the transmission charges on a Regional pooled basis, in the ratio of the quantum of power drawn through the Inter-State transmission system.

• In the pre ABT era , the apportioning of transmission service charges were done prorata on energy drawal basis.

• Post ABT the apportioning to different beneficiaries was on the basis of capacity allocation (MW) out of the total capacity handled by the transmission system in the region.

• The quantum of power allocation is calculated as the sum of entitlements (firm share plus share from unallocated quota of power in the Central Generating Stations) from Central Generating Stations

PRE AND POST ABT ERA

ENTITLEMENTS OF REGIONAL BENEFICIARIES : CASE STUDY

RAMAGUNDAM STPS: (3x200+3x500) MW

• TAMILNADU :470 MW• ANDHRA :580 MW• KARNATAKA :345 MW• KERALA :245 MW• PONDY :50 MW• GOA :100 MW• UNALLOCATED SHARE :310 MW

TOTAL 2100 MW

Ramagundam Evacuation scheme

• Ramagundam –Hyd 400 KV S/C• Hyd-Nagarjuna Sagar 400 KV S/C• N’Sagar-Cuddappah 400 KV S/C• Cuddappah-Bangalore 400 KV S/C• Ramagundam-N Sagar 400 KV S/C• Bangalore –Salem 400 KV S/C• SS at Cuddappah, Hyderabad,Salem

DETERMINATION OF YTC FOR A TR SYSTEM• RAMAGUNDAM EVACUATION SCHEME:

• CAPITAL COST OF THE PROJECT :Rs 100 Crs

• DEBT EQUITY RATIO : 70:30

• COMPONENTS OF TARIFF: (FIRST YEAR)Return on Equity @16% : Rs.

4.8 Crs Interest on Loan @10% :Rs

7.0 CrsDepreciation @ 7% of CC :Rs.

7.0 CrsO&M Charges @1.5% of CC :Rs.

1.5 CrsInterest on Working Capital :Rs

0.7 CrsANNUAL TRANSMISSION CHARGES :Rs

21.0 Crs

SHARE TO TAMILNADU PER MONTH : (470/2100)*21/12 = 0.4 Crs Approx(Regional postage post ABT)

MERITS This is the simplest form of transmission pricing.

Even with the introduction of open access in transmission this mechanism has served the needs of the system well.

DEMERITS However, with the integration of the regional grids, and the

objective of the policy and regulatory framework to provide access to sellers and buyers, an appropriate change in the pricing mechanism which is sensitive to quantum of flow, distance and direction of flow is required.

One of the problems in postage stamp method is that of “pan caking” of charges-Term used to describe stacking up of charges in a transmission system due to repeated application of charges for different regions. This can be understood with the following example cited below:

MERITS & DEMERITS OF POSTAGE STAMP METHOD

• A generator (say “A Ltd.”) in Arunachal Pradesh (NER), willing to supply power in Maharashtra (WR). According to postage system, the total charges and total transmission losses of the system for each region is pooled and is spread over the users of the system on per MW basis.

• A Ltd. will have to bear the transmission charges for three regions involved – namely NER-ER-WR (there is no direct link in NER-WR), While a local generator of WR may use own dedicated line or may pay only one region charges for supply within the region.

• Thus, a generator in other region becomes grossly uncompetitive in the sellers region. If a State Transmission Utility (“STU”) network is also used, then charges and losses of such STU would further be loaded, which may vary widely among states.

ELUCIDATION OF POSTAGE STAMP METHOD

• There is an increase in the landed cost of power in inter regional exchange of power .

• Also the actual displacement of power may be very small as against the underlying theory of assuming full displacement from injection to delivery point, due to many generators and consumers connected in between the two. The system worked well in pre-reforms era where there was only government owned agencies in both generation and demand and there were identifiable lines.

• With the reforms and private sector players coming in, the system, post 2012, would be a deeply meshed network, making it almost impossible and impractical to trace the destination to source and underlying routes.

• An ideal transmission pricing mechanism should allow the power plant developers and customers to decide the optimal location of the power plant by comparing the costs of fuel transportation and the cost of electricity transmission.

NEED TO REVIEW POSTAGE STAMP METHOD

REVISED FRAMEWORK• The beginning of the revised framework

for sharing of transmission charges and losses lies in the National Electricity Policy (NEP)

• Para 5.3.4 of the National Electricity Policy notified by the Central Government under Section 3 of the Act vide Resolution No.23/40/2004-R&R(Vol.II) dated 12.1.2005 provides as under:

“To facilitate cost effective transmission of power across the region, a national transmission tariff framework needs to be implemented by CERC. The tariff mechanism would be sensitive to distance, direction and related to quantum of flow.”

POINT OF CONNECTION METHODOLOGY BY IIT-BOMBAY• The CERC, after due consideration of the

alternative methodologies and the comments from various stakeholders has selected Point of Connection (PoC) methodology based on a hybrid method, which brings together the strengths of both the Marginal Participation and the Average Participation Method .

Any generator node is required to pay a single charge based on its location in the grid to gain access to any demand customer located anywhere in the country.

Similarly, any demand node will also be required to pay just one charge and get access to any generator in the grid.

MARGINAL PARTICIPATION

• It analyses how flow in the grid is modified when minor changes are introduced in the production or consumption of one unit of power(1 MW)

• Marginal Participation sensitivities are obtained

• UK , Norway, Brazil, Columbia have implemented.

AVERAGE PARTICIPATION

• POWER TRACING:• For every individual generator a number of

physical paths are constructed from the point of injection to reach the various loads.

• Similar calculations are performed for demands tracing upstream to reach the generators.

• Wide range for PoC charges, little international exp.

HYBRID APPROACH

• In the Hybrid method, distributed slack buses (responding nodes) are selected using AP method and the MP method is used to capture network utilisation, by injection/withdrawal at each node.

• Hybrid method results in generators feeding “geographically and electrically proximate” demand first and then the demands which are “geographically and electrically distant.”

PoC REGIME• CERC Consultation Paper Apr.

2009• Tr. Sharing Regulations June

2010• Stake holders consultations

/workshopsImplementation / Validation Committees / 50% RPS+50% PoC /SLAB RATES

• Made Effective from July 2011• 2011-2012

SR/NEW• 2012-13(H Y) 5

Regions• 2013-14 (Q Y) 5

Regions

NEED FOR SLABS

• Philosophy behind slab rates:

• Principle of Minimum regret• Min Max fairness algorithm to reduce

standard deviation• Reasons: Reduce Heart burn

Easy to comprehend and implement

PROCESS TO ARRIVE SLABS

• Computation of Nodal PoC using WebNetUse software.

• Computation of Zonal PoC rates as weighted aerage of Nodal PoC rates of each Demand/Generation Zone.

• Distribution of Demand/Generation Zonal PoC rates into three different tiers/Slabs .

SLAB RATES

• YEAR 2011-12NEW GRID SR GRID

₹/MW/Month(P/unit) ₹/MW/Month(P/unit)

70000 (10) 80000 (11)

85000 (12) 95000 (13) 100000 (14) 110000 (15)

Network data and YTC data

Network data and YTC data

Nodewise Injection /

withdrawal data

Designated ISTS

Customers (DIC)

Implementing Agency (IA) (NLDC)

Deemed / Certified

ISTS owners

ISTSlicensees

POC RATESWebNetUse Software

DETERMINATION OF POC RATES

SIZE OF INDIAN NETWORK• Buses 4830• Generating Stations 557• Generating units 1148• Loads 2672• Branches D/C lines 7

765 KV 2 400 KV 622 220 KV 3034 132 K 5130 Total 8795

POWER TRF 2030 Dynamic system,power flows by displacement

MONTHLY TR BILL OF TN (POC)

• POWERGRID APPROVED YTC FOR 2013-14(SR): 1800 Crs• TANGEDCO ENTITLEMENT OF CGS POWER : 3000

MW• TOTAL POWER HANDLED BY SR GRID : 10000

MW • TN SHARE : 30%• ANNUAL TR CHARGES TO TN ACCOUNT : 540 Crs• MONTHLY TR CHARGES PAYABLE : 45 Crs

APPROX

PRINCIPLES FOR SHARING ISTS CHARGES (POC)

• Based on the Yearly Transmission Charges of ISTS Transmission Licensees and transmission losses in the ISTS network, the Implementing Agency shall compute the Point of Connection charges and Loss Allocation Factors for all DICs:-

(a) Using load-flow based methods; and(b) based on the Point of Connection

Charge method.

• The Point of Connection transmission charges shall be computed in terms of Rupees per MW per month for an Application Period which shall be determined in advance. (PEAK/OFF PEAK –FIVE SEASONS)

PROCESS TO DETERMINE POINT OF CONNECTION TRANSMISSION CHARGES AND LOSSES

ALLOCATIONS• The Implementing Agency shall collect

the Basic Network data pertaining to the network elements and the generation and load at the various network nodes.

• The Basic Network shall not contain any electricity system, electrical plant or line below 132 kV except where generators are connected to the grid at 110 kV.

• Nodal generation information and Forecast demand data shall be submitted by the Designated ISTS Customers

• The Implementing Agency shall run AC load flows using the Basic Network, nodal generation and nodal demand. Basic Network along with the converged load flow results for various grid conditions shall be validated by the validation committee.

• Approved Basic Network, nodal generation and nodal demand data shall form the base for computation of Marginal Participation factors and loss allocation factors.

PROCESS TO DETERMINE POINT OF CONNECTION TRANSMISSION CHARGES AND LOSSES

ALLOCATIONS

• Overall charges to be shared among nodes shall be computed based on the Yearly Transmission Charge (YTC) apportioned to each of the lines of the ISTS Licensees.

• The Implementing Agency shall aggregate the charges for geographically and electrically contiguous nodes on the ISTS to create zones, in order to arrive at uniform zonal charge in Rs / MW / month.

•

PROCESS TO DETERMINE POINT OF CONNECTION TRANSMISSION CHARGES AND LOSSES

ALLOCATIONS

Implementing Agency shall create zones for generation and demand. Such zoning shall be governed by the following considerations:

(i) Zones shall contain relevant nodes whose costs (as determined from the output from the Hybrid method) are within the same range.

(ii) The nodes within zones shall be combined in a manner such that they are geographically and electrically proximate. The demand zones shall normally be the state control areas except in the case of North Eastern States, which are considered as a single demand zone. Generation zones are formed by combining the generators connected to the ISTS.

PROCESS TO DETERMINE POINT OF CONNECTION TRANSMISSION CHARGES AND LOSSES

ALLOCATIONS

TAMILNADU INJECTION POC RATES (ISTS)

• PERIOD Rate in Paise/UnitTN NLC VALLUR

KUDN 2011-12 11.00 -- ---

---2012-13(HY1) 14.0 10.00 10.00 ----

• 2012-13(HY2) 8.35 8.35 8.35 12.35

• 2013-14(Q1) 12.86 8.86 8.86 12.86

• 2013-14(Q2) 13.5 9.50 9.50 ----• 2013-14(Q3) 14.06 10.06 10.06 ---

TAMILNADU WITHDRAWAL POC RATES (ISTS)

• PERIOD Rate in Paise/Unit

• 2011-12 13.00• 2012-13(HY1) 14.00• 2012-13(HY2) 12.35

• 2013-14(Q1) 10.86• 2013-14(Q2) 11.50• 2013-14(Q3) 14.06

TNERC TRANSMISSION CHARGES (INTRA STATE)

• 2013-14(1) 27.01 PAISE/UNIT• 2013-14(2) 8.22 PAISE/UNIT• 2014-15 19.55 PAISE/UNIT• 2015-16 24.82 PAISE/UNIT

BILLING• 1) The CTU shall be responsible for

raising the transmission bills, collection and disbursement of transmission charges to ISTS transmission licensees.

• The billing for ISTS charges for all Designated ISTS Customers shall be on the basis of Rs./MW/Month, and shall be raised by the CTU in four parts.

• The first part of the bill shall recover charges for use of the transmission assets of the ISTS Licensees based on the Point of Connection methodology. This part of the bill shall be computed as:

• For Generators:Approved Injection X PoC for injection

For Demand:Approved Withdrawal x PoC for withdrawal

BILLING

• The second part of the bill shall recover charges for Additional Approved Medium Term Open Access similar to above formula. The second part of the bill shall be raised on the Designated ISTS Customers along with the first part of the bill.

BILLING

• The third part of the bill shall be used to adjust any variations in interest rates, FERV, rescheduling of commissioning of transmission assets, etc. as allowed by the Commission for any ISTS Transmission Licensee. This part of the bill shall be raised on first working day of September and first working day of March for the previous six months.

• Deviations shall be billed separately by the CTU as fourth part, bill based on the RTA issued by the RPCs. (25% extra for deviations from approved injection/withdrawal)

BILLING

BENEFITS OF NEW REGULATIONS

The PoC charge based transmission mechanism will benefit the transmission network development and the Designated ISTS Customers (DICs) of the transmission system in the following ways:

At present the transmission investments are faced with the uncertainty in generation. This commercial arrangement would facilitate financial closure of transmission investments.

The PoC based transmission pricing mechanism would facilitate integration of electricity markets and enhance open access and competition by obviating the need for pan-caking of transmission charges.

The National Electricity Policy requires the transmission charges to reflect network utilization. The Point of Connection tariffs are based on load flow analysis and capture utilization of each network element by the customers.

• The new framework will greatly facilitate fair and transparent competition for case-1 bids.

BENEFITS OF NEW REGULATIONS

THANK UFOR

DISCUSSIONS

DEFINITIONS

• ISTS: INTER STATE TRANSMISSION SYSTEM– Any system for the conveyance of

electricity by means of a transmission line from the territory of one state to another state.

– The conveyance of electricity across the territory of an intervening state as well as conveyance within the state which is incidental to such interstate transmission of energy

– The transmission of electricity within the territory of state on a system built ,owned, operated, maintained or controlled by CTU

• DESIGNATED ISTS CUSTOMER (DIC): Users of any element of the ISTS and includes

GeneratorsSTUSEB or load serving entities directly

connected to ISTS andBulk consumer

• DEEMED ISTS:Transmission system which has the regulatory approval of the Commission as being used for interstate transmission of power

• NON - ISTS LINESTransmission assets of non-ISTS licensees ,which have been certified by RPCs as being used for inter state transmission.

• BASIC NETWORKThe power system of the country at voltage levels 765 KV,400 Kv,220Kv and 132KV and HVDC Transmission network and all generator and loads connected to it.

• NODEA substation or a switchyard of a generator

• YEARLY TRANSMISSION CHARGES(YTC)Annual Transmission Charges approved by the Commission for all the transmission projects of a transmission licensee, Provisional/ Determined as per CERC T&C

Benchmarked Adopted

• LOSS ALLOCATION FACTOR Loss allocation Factor of a bus measures the losses attributed to that node .• PARTICIPATION FACTOR

Participation Factor of a node in any transmission line means the percentage of usage of that line by a node, whether a generator node or a demand node.

• PoC CHARGING METHODIt is the methodology of computation of sharing ISTS charges and losses amongst DICs , which depends on the location of the node in the grid .

• PoC TRANSMISSION CHARGESNodal/Zonal charges determined using the PoC charging method.

• UNIFORM CHARGEThe charge determined by dividing the YTC of the ISTS licensee by the

sum of the approved injection and approved withdrawal from the gridalternatively defined as POSTAGE STAMP Charge.

• UNIFORM LOSSThis means the energy loss and is accounted for by providing a differential

Power snap shot

• India• Installed capacity: 2,25,793 MW

• State 89,092(39.5%)• Central 65,613(29%)• Private 71,088(31.5%)

– Thermal 153848– Hydro 39623– Nuclear 4780– Renewables 27542

AVERAGE PARTICIPATION