ui charges rates unsheduled inter change charges

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____________________________________________________________________________________SOR to CERC(UI charges and related matters)(Second Amendment) Regulations, 2012 Page 1 of 50

No. L-1(1)/ 2011-CERC

CENTRAL ELECTRICITY REGULATORY COMMISSIONNEW DELHI

Coram : Dr. Pramod Deo , Cha irpersonShri S.Jayaraman, Member

Shri V. S. Verma, Member

Shri M. Deena Dayalan, Member

Date: 6.3.2012

In the matter of

Central Electricity Regulatory Commission (Unscheduled

Interc hange c harge s and rela ted ma tters) (Sec ond Amendment)

Regulations, 2012

STATEMENT OF REASONS

The Co mmission p ub lished on its web site on 19.08.2011 the d ra ft

amendments to the Central Electricity Regulatory Commission

(Unscheduled Interchange charges and related matters)

Reg ula tions, 2009 (hereina fter refe rred to as the p rinc ipa l

regulations) as amended from time to time, inviting

c omments/ suggestions from the sta keho lders by 10.09.2011.

2. Ab out 25 sta keho lders, inc lud ing Sta te Regulatory Co mmissions,

Generato rs, Bene fic iaries, NLDC/ PGCIL, RPCs, SLDCs, consum er etc .,

filed their written sub missions/ sug gestions. A list o f sta keholders who


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made their comments/suggestions is enclosed as Annexure-I. The

Commission also held a public hearing on 19.10.2011 giving

opportunity to the stakeholders to present their views on various

proposed amendments.

3. The Commission ha s fina lized the Centra l Elec tric ity Regulatory

Commission ((Unscheduled Interchange charges and related

matte rs) (Sec ond Amendment) Reg ula tions, 2011(hereinafte r

referred to as "Amend me nt Reg ula tions") a fter de ta iled deliberations

and due consideration of the various issues raised by the

stakeho lders. These a re d isc ussed in the suc c ee d ing pa ragraphs.

General

4. In the proposed d ra ft amendments, UI Cha rges and UI Pric e

Vector were based on Energy charges of generating stations

regulated by CERC for the period August 2010 to January 2011. With

the na rrow ing d ow n of the o pera ting g rid freq uenc y ba nd from 49.5

-50.2 Hz to 49.7 50.2 Hz, step size was proposed to be reduced from

0.02 Hz to 0.01 Hz for the UI vec to r. The UI p rice vec to r was designed

such that UI charges were set at the grid frequency of "50.2 Hz and

above" as Zero, UI Charge at grid frequency in step of "Not below

50.0Hz and below 50.01Hz" as`1.65 /kWh (Median Value of energy

c harges of c oa l/ lignite based genera ting sta tions), UI Cha rge a t g rid

frequency in step of "Not below 49.80Hz and below 49.81Hz" as

`. 4.50/kWh to ensure that all stations using imported coal also get


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despatched, UI Charges at grid frequency "below 49.7 Hz" as

`9.0 /kWh was linked to highest c ost o f gene ra tion of p ow er.

5. The responses to the p roposa l a re as und er:

(a ) Er. Padamjee t Singh ha s sub mitted tha t the worst p erforming

p lant o f Auriaya (highest SHR) should not b e c onsidered as

benchmark for specifying Max UI Charge. Moreover, the year 2011-

12 is the last ye ar of the 12th Five year plan and it is very unlikely that

capacity additions would take place in the last quarter of 2011-12.

Therefo re, the Co mmission may defe r the imp lem enta tion of UI

amendment till 31st Marc h, 2012.

(b ) Utta r Pradesh Power Corpora tion Limited (UPPCL) has sub mitted

that there is no necessity for hike in UI charges as the grid is running

norma lly in sa fe zone of frequenc y. The hike in UI c ha rges sha ll also

inc rea se the ra tes of e lec tric ity in the ma rket from ene rgy excha nge

and bilateral agreements. Narrowing of frequency is not requiredbec ause system c an run in the freq uenc y range of 50.5 Hz to 49.0Hz.

UPPCL has further submitted that the methodology of hike in U.I.

charges by linking a particular frequency to specific rate of power

sta tion viola tes sec tion 61 of the Elec tric ity Ac t, 2003 ( 2003 Ac t )

bec ause U.I. cha rges a re third pa rt o f tariff. Sec tion 61 (d ) & (g ) of

the 2003 Act have not been followed for making these regulations.

UPPCL has filed 5 writ petitions before Hon'ble High Court of

Judicature at Allahabad (Lucknow bench) And the Hon'ble Court

has passed two interim orders in the ma tter and is p resently hearing


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the pet itions on reg ula r basis. Therefo re, the d ra ft amendment m ay

be deferred till the decision of the Hon'ble High Court. UPPCL has

submitted tha t elec tric ity is supp lied into the grid from a ll the pow er

sta tions (having d ifferent rate s of e lec tric ity) a t a ll the frequenc ies; so

linking the U.I. c ha rges a t a pa rtic ula r freq uenc y to a ny "spec ific ra te

based power sta tion" is a rb itra ry. It does not reflec t the a c tua l c ost of

elec tric ity. So this methodology is inc orrec t and vio la tes the sec tion

61 (d) & (g) of the 2003 Act, which mandates to fix tariff based on

ac tua l c ost of elec tric ity.

UPPCL ha s submitted tha t NTPC has bee n g rea tly b enefitted by

high UI c ha rges. Ac c ord ing to UPPCL, NTPCs 13 genera ting sta tion's

schedules and UI generation during 2009-10 shows that on an

average, 1.35 %of excess generation is done over schedule leading

to an inco me o f over` 173 Crore (for 1145 MUs) due to the fac t tha t

UI rates are higher than energy charges by `1.51 per unit for

purcha sing 1145 MU of e lec tric ity. Therefore, UI ra tes should be

reduced.

UPPCL ha s further sub mitted tha t Anta GPS ha s genera ted 14.15%

excess generation leading to income of ` 45.92 c ores. Da d ri GPS,

FGUTPS-II and NCTPS-I have a lso earned `21.93 crores,`6.16 croresand ` . 3.55 crores respectively through extra generation of 2.45%,

1.35% & 2.45% and UI earning therefrom.

UPPCL has submitted tha t g eneration o f e lec tric ity in exc ess of the


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schedule is an act of indiscipline and therefore, excess generation

should not be paid. Regulation 2.18 of Central Electricity Regulatory

Commission (Terms & Cond itions of Ta riff) Regulations,2001 p rovided

that when the actual generation is more than schedule, the UI

c harges due to extra gene ra tion should b e reduc ed to zero. In view

of above, Regulation 24 (2) (i) of Central Electricity Regulatory

Commission (Terms & Cond ition o f Ta riff) Regulations, 2004 and

Regulation 6 (3) & (4) of Central Electricity Regulatory Commission

(Unscheduled interchange and related matters) Regulation, 2009

and its amendment dated 28.04.2010 are arbitrary and unjustified,

whic h a llow s payment for extra gene ra tion a t UI ra te.

(c ) MPPTCL ha s sub mitted tha t the utilities a re d rawing 9.11% of UI

power from the grid with the power available/injected by the

generating companies on the present frequency range of 49.2 to

50.3 Hz. Further, 17.34 % narrowing down of permissible frequency

range will increase the UI charges on utilities, which subsequently will

be p assed on to the c onsumers. The inc rea se in po wer purc ha se

amount w ill further inc rease the ta riff of Distribution Companies. The

prop osed ac tion o f the Commission will defy the p rovisions of Sec tion

61 (d) of the 2003 Act which provides for safeguarding of

consumers interest and at the same time recovery of the cost of

elec tric ity in a reasona b le manner.


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MPPTCL further sta ted tha t a t p resent there is a defic it o f 8.64 %

between the demand and supply of power from available sources.

The d em and is muc h higher tha n the injec tion. The p roposed

freq uenc y range is too narrow and does not meet the required level

for equilibrium to be maintained between the demand and supply

of elec tric a l ene rgy.

MPPTCL ha s further submitted tha t the benefic ia ries have entered

into severa l PPAs and TSAs to ensure suffic ient p roc urement o f

elec tric a l energy to ma tc h the demands of the ultima te c onsumers.

But for reasons beyond control of the beneficiaries, it has not been

possible till now, as the proposed power projects are getting

delayed for som e rea son or other. The utilities a re c om pelled to use

UI power to mee t the ir c onsumer de mands. Therefo re, the

permissible frequency range should not be narrowed down and

should rema in unchang ed .

(d ) Chhatt isga rh SPTCL ha s sub mitted tha t hike in UI ra te is ve ry steep

due to na rrow ing d ow n of freq uenc y ba nd w hic h ma y ca use hike in

ra te of elec tric ity in the market a s most o f time, UI ra te is a refe renc e

ra te in trad ing. It has been sugg ested that freq uenc y ba nd m ay be

kep t a s 50.2 to 49.6.

(e) Power Company of Karnataka has submitted that in order to

ma inta in g rid freq uenc y a s per IEGC, the Sta te of Karna taka has

done load shedding in both urban and rural areas and has been


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forc ed to purc hase pow er a t higher ra tes. It has been further

submitted that there is delay in commissioning of the projects for

mo re than one to two yea rs. On ac c ount of co ntinuous inc rea se in

demand without c orrespond ing increase in genera tion, the inc rea se

in UI rates may result in increase rates in open market and short term

proc urem ent/ b ila teral exc hanges. The c osts of p ow er from the liquid

based p rojec ts a re inc rea sing day by day. The p rop osed reg ula tion

will give more scope to Distribution Licensees to dispatch liquid

based pow er projec t run by the CGS units of o ther generating

stations. Ultimately, the power purchase cost will be increased and

burden on the consumers. It has been requested to operate in the

frequenc y rang e of 49.5-50.2 Hz.

(f) Karna ta ka Power Transmission Corpora tion Limited (KPTCL) ha s

submitted that the penalty levied from those beneficiaries who

overdraw when the frequency is between 49.849.7 Hz is very high

and for each 0.01 Hz, 40.91 paise penalty is levied, which should be

reduced. Already scheduled and unscheduled load shedding are

being carried out by the constituents. Hence, for frequency below

49.8 Hz, levy o f huge pena lty is no t feasible. KPTCL ha s further

submitted that without adding adequate generation as per

sc hed uled da tes g iven by the genera tors in c entral sec tor will ma ke

the operation of grid between 49.80 and 50.20 Hz highly difficult for

a ll SLDC s.


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(g ) MSEDCL ha s sta ted tha t it is no t indulging in ind isc rimina te

overdrawa l from the g rid and in sp ite o f contrac ting p ow er to meet

its antic ipa ted dem and, if and when it overdraws from the g rid , suc h

excursions a re d ue to the rea l time va ria tions in the d em and and / or

supply. However, utmost care is taken to implement corrective

ac tions imme d ia te ly and to a b ide b y grid d isc ip line. MSEDCL ha s

further submitted that it would be practically impossible for a huge

system like MSEDCL to matc h its genera tion a va ilab ility and load in

ea c h freq uenc y step of 0.01Hz. Therefo re, c onsidering the fac t tha t

the g rid has been op era ting a t a n imp roved freq uenc y during 2010-

11 and there has not been any major grid security problem during

these yea rs, MSEDCL ha s sug gested for c ontinuing with existing UI

rates and the Commission may levy additional penal charges on

utilities without tightening the operating frequency band to further

ensure the grid sec urity and book the erring utilities.

(h) POSOCO ha s submitted tha t narrow ing grid freq uenc y range w ill

he lp in sync hroniza tion o f SR and NEW grid , and will he lp in a bsorb ing

RES like wind ene rgy.

(i) PTC has submitted tha t na rrowing grid freq uenc y range w ill help in

be tter grid m ana gement.


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(j) Tamil Nad u Generat ion and Distribution Corpora tion Limited

(TANGEDCO ) has sub mitted tha t the Commissions observation in

para 6 that "the concern that shrinkage of UI frequency band may

lead to increase in load shedding is mitigated in view of additions

taking p lac e p resently" does not appea r to have b een ma de b ased

on ac tua l position. The 11th Plan capacity addition which was

envisaged at 78700 MW has been pruned down to 62000 MW and

the p resent rea lity is tha t it may not exceed 50000 MW. The

antic ipa ted add ition o f 16531 MW befo re 31.3.2012, end of 11th Plan,

ma y not materia lize fully and may sp ill over to the first yea r of the 12th

plan.

(k) R2I ha s sub mitted tha t sho rt fall o f over 43% during 2010-11 and

short fall of over 29% during 2011-12 (till August 2011) have been

rep orted in the c apac ity add ition in the c ountry. The Comm ission

has ove restima ted the supp ly side a nd und erestima ted the d emand.

6. We have c onsidered the ob jec tions and suggestions as note d

in p ara 5 above. UPPCL and MPPTCL ha ve questioned the ra tiona le

of UI c ha rges. The Commission, in the Sta tement of Reasons to the

first a mend ment to UI regulat ions issued on 26.05.2010 has dea lt w ith

simila r ob jec tions of UPPCL as under:

"A. Whethe r the UI Cha rges and va rious UI c ap ra tes a re ag a inst the provisions ofElectric ity Ac t, 2003 and aga inst the Hon ble Supreme Court Judgm ent

9. UPPCL has subm itted tha t the p rop osed princ ip les and me thod olog ies app lied forcharging UI rates for deviation from schedule is against the provisions of Electricity Act,


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2003 (the Ac t) a nd ag a inst the Hon ble Supreme C ourts order dated 17.8.2007 in thec ase o f Ce ntral Pow er Distribut ion Co & ot hers vs CERC & Anr. [(2007) 8 SCC 197] a ndCERC order d a te d 04.01.2000 on ABT.

10. UPPCL has further stated that the UI being 3 rd part o f ta riff as per ABT Orde r of4.1.2000 and as per the Hon b le Sup rem e Court s judg me nt in Cent ra l Pow er Distribution

Co & o rs Vs. CERC & Anr, it m ust b e c onsistent w ith Sec tion 61 (d) and 61(g) o f the Ac t,which provide that the tariff progressively reflects the (incurred) cost of supply andtherefore, UI rate c anno t b e linked to c ostliest form of g ene rat ion. The Comm ission wa stherefore, req uested to fix ap prop riate rates as pe r the Ac t. Ac c ording to UPPCL, there isa need to take new and alternative steps by providing additional allocations/powerpurchase a rrange me nts favo urab le for deficit Sta tes and by restraining the und ueenric hme nt o f p rofit to ge nerato rs/ surplus Sta tes who are ea rning at the cost o f thedefic it sta tes. Simila r views have b ee n ec hoe d b y othe r bene ficiaries na me ly MPPTCL,GVUNL, HPPC etc. According to the UPPCL, the proposed UI charges are required to bed iscussed be fore Cent ral Ad visory Comm ittee as per sec tion 81 of the Ac t.

11. UPPCL has further stated that the Govt. of India may be advised by theCommission u/s 79 (2) of the Act to allocate power from 15 % unallocated share, tode ficit State s and cha nge the p olic y of a lloc ation to the State s.

12. We are una b le to subsc ribe to the p oint of view o f UPPCL and othe r be neficiariesreg a rd ing UPPCLs interp reta tion of the Hon'ble Supreme Court s judgm ent c ited abo ve.The interpretat ion a ims to que stion the very essenc e of the conc ep t o f UI as acommercial mechanism to ensure grid discipline which has been authoritatively settledby the Hon'ble Supreme Court and therefore, the a rgum ents a re d evo id o f any merit asd isc ussed hereina fte r.

13. The Hon b le Sup rem e Co urt in its judg ment da ted 17.8.2007 in Ce ntral Pow erDistribution Co & ors supra has explained the concept of Unscheduled Interchange inthe following terms:

WHAT IS UI (UNSCHEDULED INTERCHANG E)

10. In ad dition to tw o c ha rge s, a third cha rge c onte mp lated in the ABT sc hem e is forthe unsc hed uled intercha nge of p ow er (UI c harges). The UI c ha rge s are p aya bledepending upon what is deviated from the schedule and also subject to the gridc ond itions at t hat p oint of time. This eleme nt wa s introduc ed to b ring ab out theeffe c tive d isc ipline in the system. Unde r this system UI cha rge s will be p ayab le, if:

i) a g ene rator gene rates mo re tha n the sc hed ule, thereby inc rea sing the freq uenc y;ii) a g ene rator gene rates less tha n the sc hed ule, thereby de c rea sing the freque nc y;iii) a b ene fic iary overdraws po we r, thereb y de c rea sing the freq uenc y;

iv) a b ene fic iary unde rdraw s pow er, thereby inc rea sing the freq uenc y.

11. It is thus clear from the above that UI charges are a commercial mechanism toma intain g rid d isc ipline. The UI cha rges pena lises whosoe ver c aused grid ind isc ipline,whether ge nerator (NTPC) o r d istributo r, is sub jec t to payme nt o f UI cha rges who a renot fo llow ing t he sched ule. The UI c harges a re no t p aya ble if the a ppe llants ma intainthe ir d rawl of elec tric ity consistent w ith the sc hed ule given b y them selves. Therefo re,there is no merit in the contention of the appellants that the UI charges are by way ofpena lty. {Emphasis laid}


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14. The Hon b le Sup rem e Court framed the issues as und er:

(A) Whethe r the application o f Ava ilab ility Based Tariff (ABT) in relation to

Unscheduled Interchange (UI) charges, which otherwise is not a component of

tariff in terms of Regulation 15 of the Central Electricity Regulatory Commission(Terms and Co nd itions of Tariff) Reg ulations, 2004 and they a re liab le to b e he ld

as beyond the jurisdiction of the Central Electricity Regulatory Commission

(CERC)?

(C) Ca n the Availab ility Based Tariff as esta blished and p rovide d in the orde r

of the C ERC b y its order da ted 4.1.2000 be imp lemented unde r the p rovisions of

Electricity Act, 2003, particularly when there is no provision under the statute that

allows the CERC to levy Unsc hed uled Intercha nge Cha rge s?

(D) whe ther in the present fac ts and c ircumsta nc es as rega rds the Simha dri STPS

therma l sta tion of the Nationa l Therma l Power Co rporation (NTPC) whic h

ad mittedly supp lies po wer to t he State Grid and has no c onnec tion with the

ma nag em ent o f the Nationa l Grid, c an the CERC in suc h c irc umsta nces exercise,

pa rticularly when m at ters relating to the Sta te Grid falls within the role a nd

func tion of the Sta te Elec tric ity Reg ulato ry Comm ission?

15. While ruling on the ab ove que stions of law, the Hon ble Supreme Court o bservedas fo llow s:

Question (A) (22) The a pp lic a tion o f Ava ilab ility Based Tariff and imposition o f Unsc hed uledInterchange (UI) charges are essential part of the Functions of the CentralCo mm ission und er Sec tion 79(1)(h) of the Elec tric ity Ac t, 2003 which rea ds tospe c ify Grid Code having rega rd to the G rid Standards, and unde r Sub-sec tion

(2) of Sec tion 28 rea d w ith Sec tion 178(2)(g ) de a ling w ith the Cent ra l Co mm issionpo we rs to frame Grid C od e. The m aintena nc e of Grid disc ipline envisag ed underthe Grid Co de is reg ulate d by the m ec hanism o f ABT and UI c ha rges. There is nobasis for the a ppellant to c ontend tha t unless som eth ing is a p a rt of Tariff theCe ntral Commission c annot exerc ise p ow ers and func tions. The A BT and UIcha rge s are c om me rc ial mec hanism to c ontrol the utilities in sc hed uling, d ispa tc hand drawl and the UI charges are tariff or charges payable for deviations. In thefacts and circumstances mentioned above the legal position is clear and there isno a mb iguity in respec t o f the jurisdic tion of the Central Com mission.Question (C)(24) As already noticed, the Central Commission has the power and function toevolve commercial mechanism such as imposition of UI charges to regulate and

disc ipline. It is we ll settled tha t a po we r to regulate includes within it the po we r toen force . See Ind u Bhusan vs. Rama Sund eri, AIR 1970 SC 228, K. Ramana than vs.Sta te of Tamil Nadu (1985) 2 SCC 116, V.S. Rice and Oil Mills vs. Sta te of And hraPrad esh, AIR 1964 SC 1781, Dee pak Theatre, Dhuri vs. Sta te of Punjab , 1992Supp.(1) SCC 684.

Que stion (D)(25) In the fac ts and c irc umstanc es as alluded , and as pe r the Schem e o f theElectricity Act, 2003 mentioned above, the Central Commission has the plenary


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power to regulate the Grid, particularly in the context of the Grid beinginteg rate d and c onnec ted ac ross the region co mp rising o f mo re tha n one State .The State Grid c annot be isolated and ca nnot b e seen a s inde pe ndent from theregion.

16. It is c lear from the ab ove judg me nt of the Sup rem e Court that the Central Comm ission has

plenary pow er with reg ard to ma intaining grid discipline in ac co rda nce with the Grid Cod e. Ithas also b een unam biguo usly uphe ld that UI c harges a re a c om me rc ial me chanism to m a intaingrid discipline and the Central Commission has the power and functions to evolve commerciamechanism in the form of imposition of UI charges to regulate and discipline the grid. As thepower of the Central Commission to impose the UI charges for maintaining the grid disciplinehas be en up held b y the Supreme Court, the c hallenge t o the UI c ha rge s as not b eing c onsistentw ith the p rovisions of Sec tion 61 of the Ac t c annot b e susta ined . The issue a s rega rds the lega lityof the levy of Unscheduled Interchange Charges has attained finality with the aforesaidjud gment of the Hon b le Sup rem e Court.

17. In this ba c k d rop , the ob ject ive of the UI me chanism nee ds to b e c lea rly unde rstood anapprec iate d . The Co mm ission in its Sta tem ent of Rea sons exp laining the va rious p rov isions of Uregulations 2009 has stated as follows:

UI pric ing is expe c ted to serve the twin ob ject ives of spe c ifying settlement rate

for deviations from schedules in normal operating range and ensuring grid

discipline on the one hand while ensuring maximisation of generation at optimal

cost for grid participants on the other. Further, UI pricing mechanism should

discourag e grid pa rticipa nts from using UI mec hanism as trad ing instrument.

18. Therefo re, the gene sis of spec ifying UI c ha rges based on m aximum c ost o f gridc onnec ted ge neration i.e. energy c ha rge s ba sed on liquid fue l is to e nsure tha t eve ry bitof available power should be supporting the grid, even the costliest one, under low gridfreq uenc y co ndition which indica tes a d efic it c ondition. It need s to b e a pp rec iate d tha tthe beneficiaries are under no compulsion to overdraw from the grid. If they adhere totheir respective schedules, then there shall be no UI liability accruing to them whatever

ma y be the grid c ondition.

19. Earlier, in 2007, when there was no market platform for trading in real time, the UImec hanism d id offer a real time ba lanc ing m arket o f po wer, where State s c ould buyand sell power at rates determined by the system conditions, i.e. buy or sell power athigh rates in deficit conditions and at low rates in surplus conditions. However, it wasob served that som e Sta tes took this as a license to o verdraw p ow er from the grid at theexpense o f the othe r Sta tes, thus jeopa rdising sec urity of the integ rat ed grid through loa dgeneration imbalance and overloading of transmission corridor. It was also found thatthe ove r d rawing Sta tes we re no t making UI payme nts in time . The C om mission hastherefore, taken a view that UI should not b e treate d as a rea l time ba lanc ing m arket b yputting limits on over drawal and under injection below grid frequency of 49.5 Hz and

provided for payment of additional UI charges for over drawls and under injectionsbelow grid frequenc y of 49.2 Hz, which were 40% highe r tha n the UI ra te a t 49.2 Hz.

20. In the m ea ntime , two p ow er exc hang es had also sta rted op erating b y then withthe a pp roval of the Com mission for the d ay-ahea d ma rket, which offered sep arate a ndtransparent p latfo rms for buying a nd selling o f po we r in the rea l time . Subseq uently, theda y ahea d c ontingenc y ma rket and t he intra-da y ma rket has also b een a llow ed by the


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Commission to be operated by the Power Exchanges. Overloading of certaintransmission corridors have now be c om e a rea l prob lem.

21. In the view of the Commission, priority of Grid security is the highest in theoperation of the grid, and therefore, the generators / sellers and the beneficiaries/ thebuyers should use other avenues like bilateral trading or the trading platforms of power

exchanges by availing open access for meeting short term, medium term or long termarrangements or agreements. UI mechanism should not be used as a real time marketany mo re.

22. It ma y further be apprec ia ted tha t the ge nerato r or the Sellers and the Bene fic iariesor the buyers are legally entitled to or liable for their net injections or drawlscorresponding to their schedules conforming to allocation/shares in terms of theagreem ents or the c ontrac ts from spe c ific source or destination.

23. In view of the de libe rat ions in ab ove parag rap hs, we a re of the view that UImechanism as provided earlier and in its amended form as discussed in subsequentparag rap hs is neither ag a inst the p rovisions of the Ac t no r against t he Hon ble SupremeCo urt judg me nt in the c ase o f Ce ntral Pow er Distribut ion Co . supra and the C om mission sorder da ted 04.01.2000."

7. The Commission reitera tes the above views in response to the

ob jec tions of UPPCL and MPPTCL. As rega rds the sug gestions of

UPPCL to defer the amendment till the disposal of the UI cases

pending before the Honble High Court, we are of the view that

pendency of cases does not prevent the Commission to discharge

its statutory responsibility to regulate the inter-State transmission of

elec tric ity by ma king approp ria te regula tions or making amendm ent

to existing regulat ions.

8. With regard to the UPPCL's sub mission rega rd ing undue

profiteering by the NTPC c iting the UI deta ils in respec t o f 13 sta tions

of NTPC for the year 2009-10, we find tha t in c ases of sta tions exc ep t

Ta lc her TPS, the d ec la red c apac ity wa s more tha n the sum of

generation schedule and the UI generated by each station which

clearly indicates that the beneficiaries had not given the full


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sc hedule, spec ia lly so in c ase of gas/ RLNG/ Liquid fuel based sta tions

namely, Anta, Dadri, Auraiya, and load center stations namely,

FGUTPS-I & II and NCTPSI. More UI gene ration in gas/ RLNG/ Liquid

fuel based stations namely, Anta, Auraiya, Dadri is understandable

as capacity on high cost RLNG and liquid fuel is not generally

dispatched by the beneficiaries and when the UI rate is favorable

and is higher than the energy charges on RLNG and liquid fuel, the

gene ra tor generates more p ow er as UI and helps the g rid . The use o f

energy rate of natural gas by the UPPCL is not correct. It is clarified

for the information of all concerned that there is no compulsion on

any of the utilities to overdraw from the grid and prudent utility

p rac tic e req uires tha t they ma nage the ir c onsumer loa d on the b asis

of the scheduled power arranged by them. If the utilities do not

overdraw from the grid, then they would not be required to pay UI

charges. When the utilities overdraw knowing fully well that UI rates

are applicable for such overdrawal, they are liable to pay for the

energy so d rawn a t UI ra tes.

Basis of determination of UI Rates

9. In the Exp lanato ry Mem orandum to the d ra ft amendm ent, the

energy charges of coal/lignite based generating stations regulatedby CERC for the period Aug ust 2010 to Janua ry 2011 were ta ken into

c onsidera tion for fixing the UI ra tes. The energy c ha rges for the

period Aug ust 2010 to Janua ry 2011 were c onsidered as und er:


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S.No Stations Aug -10 Sep -10 Oc t-10 Nov- 10 Dec-10 Jan-11 Average

1 TTPS 92.45 90.50 87 59 83.76 87.74 87.15 73.60

2 Korb a STPS 83.24 80.02 73.53 92.91 81.66 90.87 83.71

3 Sipa t-ll 107.80 129.40 97.61 82.82 71.36 66.65 92.61

4 Riha nd -I 140.99 167.74 122.56 127.47 120.87 117.21 132.815 Sing rauli STPS 138.04 136.45 137.15 132.13 132.85 144.90 136.92

6 Vlndhyanchal-ll

144.04 154.12 126.97 134.31 127.62 141.80 138.14

7 Vindhyanchal-lll

144.04 154.12 126.97 134.31 127.62 141.80 138.14

8 Riha nd -ll 146.84 172.95 128.63 133.81 127.31 121.44 138.50

9 Vind hya nc ha H 149.29 159.74 131.58 139.19 132.25 146.96 143.17

10 Ta lche r-ll 175.73 146.22 157.12 150.66 149.55 170.81 158.35

11 Ta lche r-I 175.72 164.21 157.12 150.66 149.55 170.80 161.34

12 RamagundamIII 136.94 153.71 178.69 162.75 152.64 187.00 161.96

13 Ramagundaml&ll

196.37 171.97 139.57 149.79 167.62 153.84 163.19

14 Simhadri-I 200.08 183.72 155.75 125.86 146.02 174.57 164.33

15 Tand a 230.56 212.91 191.45 197.26 201.37 192 29 172.26

16 TPS I Expansion 170.40 174.70 180.01 185.80 179.00 180.70 178.44

17 TPS II 185.80 192.10 187.80 186.60 186.60 186.50 187.57

18 Kaha lga on-ll 189.37 210.40 192.52 177.50 184.25 199.95 192.33

19 Uncha ha r-lll 197.91 193.33 197.08 194.22 189.09 187.38 193.17

20 Uncha ha r-ll 198.74 198.02 197.29 193.88 188.78 187.37 194.01

21 TPS I 194.80 195.00 196.00 197.60 195.80 195.80 195.83

22 Uncha ha r-I 198.44 204.21 203.70 195.67 190.73 188.16 196.82

23 Kaha lga on-I 196.20 217.94 199.49 183.86 190.91 207.06 199.24

24 NCTPS-il 245.20 219.20 210.90 202.00 204.50 221.70 217.25

25 NCTPP Oadri 263.86 239.26 230.32 221.78 223.63 247.57 237.74

26 BTPS 354 11 343.77 275.47 294.24 298.98 320.04 255.42

27 Farakk a STPS 306.94 307.35 306.22 289.15 287.37 293.85 298.48

It ma y be seen that the med ian value o f energy c harges of the

coal based stations is 164.33 paise/kWh. Accordingly, it was


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proposed that UI rate should be fixed at ` 1.65/ kWh a t 50.00 Hz in

line with earlier method ology.

Simila rly, the energy c ha rges of Ga s/ RLNG/ Liquid fuel based

generating sta tions reg ula ted by CERC for the p eriod Aug ust 2010 to

Janua ry 2011 a re as und er:

Stations Fuel Aug -10 Sep -10 Oc t-10 Nov- 10 Dec- 10 Jan-11 Average

An ta Liq iud 751.59 751.59 751.59 751.59 751.59 803.63 760.26

Gas 249.60 266.96 244.47 264.48 288.95 248.61 260.51

RLNG 371.46 351.19 348.38 359.76 363.70 410.58 367.51

Auriya Liq iud 878.80 887.30 887.30 887.16 887.16 948.39 896.02Gas 242.76 254.72 232.01 238.78 235.13 236.47 239.98

RLNG 471.88 429.53 429.40 437.70 442.70 481.54 448.79

Dadri Liqiud 760.70 760.70 760.70 760.70 760.70 780.34 763.97

Gas 246.53 253.83 242.59 236.79 237.36 238.52 242.60

RLNG 404.97 417.29 418.43 433.34 437 17 492.75 361.13

Kaw as Liq iud 614.25 601.34 601.34 380.44 380.44 695.07 545.48

Gas 212.05 197.45 200.84 190.13 192.52 193.06 197.68

RLNG 265.14 282.86 231.25 238.18 345.17 477.62 306.70

Ga nd ha r Ga s 196.06 195.81 194.00 189.13 190.17 190.92 192.68RLNG 325.45 371.29 315.49 325.81 330.77 452.81 353.60

Kayamkulam

Nap tha 686.54 694.48 711.95 752.59 792.82 841.62 746.67

Farida bad Liqiud 782.66 772.03 772.03 353.83 768.59 772.21 703.56

Gas 210.93 207.75 207.72 207.72 206.26 206.85 207.87

RLNG 357.59 336.27 336.22 336.22 348.77 386.43 350.25

Assam Gas 142.30 146.50 149.90 143.40 144.40 152.10 146.43

Ag arta la Ga s 195.00 198.00 192.80 186.30 186.90 189.50 191.42

It may be seen tha t the highest c ost o f gene ra tion is in c ase of

Auraiya CCGT Sta tion which is 896.02 Pa ise/ kWh. It w as ac c ord ing ly

proposed to keep the UI charges at below 49.7 Hz as 900

paise/kWh.


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10. The responses to the p rop osed ame nd ment on this p oint was as

under:

(a ) Er. Padamjee t Singh ha s sub mitted tha t the worst p erforming

p lant o f Auriaya (highest SHR) should not b e c onsidered as the

benc hma rk for spec ifying Ma x UI Cha rge.

(b) NLC has submitted that the UI Charge at grid frequency in step

of "Not below 50.0Hz and below 50.01Hz" as` 1.65 /kWh (Median

Value of ene rgy charges of c oa l/ lignite b ased gene ra ting sta tions)

is lesser than e nergy c ha rges of lignite based sta tions a t NLC. This

will not enc ourag e the Sta tion Operato rs to ma inta in gene ra tion to

ma tc h w ith the sc hed ule even a t ra ted freq uenc y of 50.0Hz. The UI

ra te is ec onomic a l only for c oa l based p it end sta tions. To

encourage generators and ensure economic despatch, UI rate

corresponding to rated frequency 50.0 Hz may be raised upwards

to the energy charges of the respective stations. As higher limit of

operating frequency band is being continuously narrowed from

50.5 to 50.2 Hz, UI price vector between 50 Hz to 50.2 Hz should be

ma de m ore a ttrac tive to ma intain gene ra tion a t this level.

(c ) Chha ttisgarh SPTCL and pow er Com pany of Ka rna taka have

submitted tha t inc rea se in UI Cha rges and narrow ing dow n o f grid

freq uenc y would lea d to hike in ra te o f elec tric ity in pow er ma rket.


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(d ) R2L, MPPTCL, TANGEDCO ha ve sub mitted tha t narrowing down

of the grid frequency has led to steep rise in the UI charges in the

new operating g rid freq uenc y range of 50.2 Hz to 49.7 Hz. They

have also argued that sufficient capacity addition has not taken

p lac e d ue to d elay in exec ution of 11th p lan p rojec ts.

(e) MSEDCL has submitted tha t the g rid ha s bee n op erat ing a t an

improved frequency during 2010-11 and there has not been any

major grid security problem during these years and therefore, the

Commission should continue with the existing UI rates and may levy

add itiona l pena l c harges on utilities without tightening the o perating

freq uenc y b and to further ensure the grid sec urity.

(f) KPTCL ha s sub mitted tha t for 0.1 Hz reduc tion in frequenc y,

penalty works out to ` 4.091/kWh, which is a very huge burden on

c onstituents in view of c oa l shortag e and delay in upc om ing

generation projects like Kundamkulam, Neyveli Exp-II and other

projects in central sectors. The existing UI charges may be

continued till the coal problem is solved and commissioning of

p rop osed p rojec ts.

11. We have c onsidered the ob jec tions and suggestions of thestakeholders. No one has objected to the UI Charge as Zero at grid

frequency of 50.2 Hz and above to discourage generators to over

injec t into the grid , or the b ene fic ia ries or buyer to under draw from

the g rid. As regards the sub mission o f Er Padamjeet Singh, it is


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reitera ted that the c ommerc ia l mec hanism UI has been p rovided to

ensure grid discipline and it is desirable that under condition of grid

d istress, every b it of a va ilab le g enerat ion should be fed into the g rid .

Therefo re, it is nec essa ry tha t even the c ostly p lant generates power

a t very low g rid freq uenc y c ond itions, irrespec tive of its efficienc y. In

view of this, we would like to continue with the existing practice of

specifying max UI charge corresponding to highest cost of

genera tion which is from Aura iya GPS. As rega rds the sub mission o f

NLC, it is clarified that all coal/lignite based stations are not

nec essarily genera ting a t 50.0 Hz. For setting the UI p rices a t the g rid

frequency of "50.2 Hz and above" as Zero, UI Charge at grid

freq uenc y in step of "Not below 50.0Hz and below 50.01Hz" as` 1.65

/ kWh (Med ian Va lue of energy c harges of c oa l/ lignite based

gene ra ting sta tions) a nd UI Cha rge a t g rid freq uenc y in step of "Not

below 49.80Hz and below 49.81Hz" as ` 4.50 /kWh, the same

method olog y has been a dop ted whic h wa s ad op ted in setting the

UI p ric es ea rlier. The same me thod ology has been a dop ted for

specifying these UI Charges. As regards the submission that

narrow ing dow n of freq uenc y band and inc rea se in UI p ric es has led

to increase in the price in the power market, it is clarified that the

incentive/disincentive mechanisms introduced through UI aim to

ad just the d rawa l/ injec tion to take c are o f grid sec urity on rea ltime

basis. On the other hand, power is traded on a day ahead basis in

the PX and on days, weeks or months ahead basis in the case of

elec tric ity transac ted through traders. The rate o f elec tric ity in the


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power market depends upon the demand supply scenario in the

rea l time . Therefore, the UI ra te w ould no t ha ve m uc h effec t on the

pric e in the powe r ma rket. Tab le 1 and Tab le 2 be low g ive the

volume a nd p ric e of elec tric ity traded on the pow er exc hang es and

through traders. It can be seen that the rate of electricity in power

ma rket ha s rema ined low as c ompared to the high ma x UI c harge.

Tab le-1: Volum e of Elec tric ity Transac ted through Trade rs & Power Exc hang es

Yea r Elec tric ity Transac ted throug htrading Licensees (BUs)

Elec tricity Transac ted throug h IEXand PXIL (Day Ahea d Ma rket &

Term A head Ma rket ) (BUs)

2008-09 21.92 2.77

2009-10 26.72 7.19

2010-11 27.70 15.52

2011-12 (Apr-Oct2011) 23.86 9.68

Note 1: The vo lume o f elec tric ity transac ted through trad ing lic ensees in 2008-09 (Ap ril to

July 2008) inc ludes cross border trading and intra-sta te trad ing vo lume.

Tab le- 2: Price of Elec tricity Transac ted through Traders & Power Exc hanges

Yea r Price of Elec tric ity transac ted

throug h Trading Licensees

(`/ kWh)

Price of Elec tric ity transac ted

throug h Power Exc hang es

(DAM+TAM) (`/ kWh)

2008-09 7.29 7.49

2009-10 5.26 4.96

2010-11 4.79 3.47

2011-12 (Apr-Oct2011) 4.09 3.51

12. Ca pac ity add itions during the p lans a re as under:

Plan / Financ ial year Ca pa c ity (MW) Ca pa c ity Ad dition(MW)

End of 6th Plans(31.03.85) 42585

End of 7th Plan (31.03.90) 63636 21052


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End of 2 yearly Plans(31.03.92) 69065 5429

End of 8th Plan (31.03.97) 85795 16730

End of 9th Plan (31.03.02) 105046 19251

End of 10th Plan (31.03.2007) 132329 27283

NOVEMBER. 11 185497 53167

It is evident that there is substantial capacity addition during the

11th plan of the order of 53167 MW by November 2011 despite

slippages which is much higher than the capacity additions in otherplan periods. A sizeable capacity is expected to be commissioned

by the end of the financial year 2011-12. We expect that the

prevailing problem of coal shortage would be overcome in due

c ourse w ith the imp ort of c oa l. Apart from above, lot o f capac ity is

being tied up in c ase-I and c ase-II c om petitive b idd ing routes and a

lot of merchant capacity is coming up as discussed in theexplanatory memorandum to the draft amendments. We do not

agree w ith sub mission o f KPTCL rega rd ing the shortfa ll in capac ity

add ition. The Commission is of the view tha t it is the right time to

narrow down the grid frequency band further as proposed in the

d ra ft amend ment to the IEGC.

13. In the exp lanato ry memo randum to the d ra ft amendment,

elaborate reasoning for narrowing of operating grid frequency

range from 50.2-49.5Hz to 50.2-49.7Hz have been given which are

not repeated for the sake of brevity. In line with the methodology


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adopted till now, the maximum UI charge of` 9.00 per unit should

be a pp lic ab le a t grid freq uenc y be low 49.7 Hz with the narrow ing o f

the grid frequency so that all available generation is available at

49.7 Hz grid frequency. Earlier the maximum UI charge was

applicable at grid frequency of 49.5 Hz thereby prompting

generation from the costliest power plant. It is a fact that there is

substantial increase in UI Charges from the earlier UI charges in the

grid frequency range of 50.2-49.7 Hz as per the proposed UI price

vector in the draft amendment. We are also conscious that there is

improvement in the grid frequency and over drawls have been

reduced. Considering these factors and having regard to the

concerns of the beneficiaries, the Commission is of the view that UI

p ric e vec tor should b e d esigned in suc h a w ay that the m aximum UI

c harge of`9.00/ kWh is ma de a pp lic ab le a t g rid freq uenc y of b elow

49.5 Hz instead of 49.7 Hz. However, there is a risk that the

beneficiaries may continue to over draw below 49.7 Hz and it may

not turn out to b e a deterrent and it ma y be d iffic ult to enforc e the

operating grid freq uenc y band . The Co mmission is therefo re, of the

view that in order to enforce the grid discipline and ensure that the

grid frequency remains between 50.2-49.7 Hz, additional UI charge

should be made applicable at 20% of the maximum UI charges

below grid freq uenc y of 49.7 Hz and up to 49.5 Hz. The c onduc t o f

bene fic ia ries sha ll be w atc hed and if it is found tha t the b ene fic ia ries

are resorting to grid indiscipline and overdrawing power

indiscriminately, then the Commission may apply the maximum UI


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c harge of` 9.00/ kWh a t g rid freq uenc y b elow 49.7 Hz.

Reduc tion of Step size from 0.02 Hz to 0.01 Hz

14. The d ra ft a mend me nts to the UI Reg ula tions a lso p rov ided for

reducing the step size from 0.02 Hz to 0.01 Hz in the UI price Vector.

With regards to this proposed change, the stakeholders have

sub mitted as follows:

(a ) POSOCO ha s submitted tha t the frequenc y step is p rop osed to

be c hanged from 0.02Hz to 0.01Hz, and ac tions a re being ta ken by

CTU to p roc ure Spec ia l Energy Me ters with new spec ific a tion.

Proc urem ent , insta lla tion, testing and va lida tion ma y take some time

and hence some provisions are required for interim period between

notification of the amendment Regulations and data receipt from

new meters. Till the c ommissioning of new meters and tria l op erat ion,

a sep ara te UI ra te tab le w ith 0.02 Hz step size m ay be ind ic a ted .

(b) Pow er Comp any of Karna taka has subm itted tha t ea c h step in

new 0.01 Hz ma y be d iffic ult in opera tion and mo nitoring .

(c ) NTPC has sub mitted tha t the Commission should c onsider toreta in the higher frequenc y interva l (0.02Hz) for UI ra tes. Alte rna tively,

a small dead band of say 0.1 Hz may be considered at the two

thresholds for applying additional UI, which will provide a small

cushion to tide over uncertainties. Additional UI may be applied


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below 49.6 Hz up to 49.4 Hz and below 49.4 Hz respec tively. This may

app ly to b oth over d rawls and unde r injec tion.

(d ) NRPC ha s submitted tha t in terms of pa ra 1(b)(i) of pa rt-II of

Sc hedule to the Centra l Elec tric ity Authority (Insta lla tion and

Operation of Meters) Regulations, 2006, the resolution of inter-face

meters ought to be 0.02Hz.

15. It has been explained in the explana tory memo randum to the

draft amendments to the UI regulation that it is desirable to specifythe UI charges in the step size of 0.01 Hz due to narrowing of

op erating g rid freq uenc y range. How eve r, POSOCO ha s ind ic a ted

tha t ac tions a re b eing ta ken by CTU to p roc ure Spec ia l Energy

Meters with new spec ific a tion. Proc urem ent, insta lla tion, testing a nd

va lida tion may take some time. The Ce ntra l Elec tric ity Authority

(Installation and Operation of Meters) Regulations, 2006 also do notprovide for installation of SEM of resolution of 0.01 Hz. Under the

c irc umstanc es, we d irec t the CTU and the POSOCO to take up the

issue of amendment of Central Electricity Authority (Installation and

Opera tion o f Mete rs) Regulations, 2006 with CEA. Till the sa id

reg ula tion is amended , CTU is advised to take ac tion for the

insta lla tion o f SEM mete rs of 0.01 Hz resolution. Afte r CTU ha s

c ompleted the insta lla tion o f suc h SEMs, CTU/ POSOCO may inform

the same to the Commission for notifying the UI price vector

c onforming to the step size o f 0.01 Hz and the da te of its c om ing into


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effec t. Till suc h time, the Co mmission has dec ided to spec ify UI p ric e

vec tor in step size of 0.02 Hz. Ac c ord ing ly, the UI Pric e Vec to r sha ll be

as fo llows:

Averag e Freq uenc y of the t ime bloc k(Hz) UI Rate

Below Not Below (Pa ise per kWh)

50.20 0.00

50.20 50.18 16.50

50.18 50.16 33.00

50.16 50.14 49.50

50.14 50.12 66.0050.12 50.10 82.50

50.10 50.08 99.00

50.08 50.06 115.50

50.06 50.04 132.00

50.04 50.02 148.50

50.02 50.00 165.00

50.00 49.98 193.50

49.98 49.96 222.00

49.96 49.94 250.50

49.94 49.92 279.00

49.92 49.90 307.50

49.90 49.88 336.00

49.88 49.86 364.50

49.86 49.84 393.00

49.84 49.82 421.50

49.82 49.80 450.00

49.80 49.78 478.13

49.78 49.76 506.25

49.76 49.74 534.38

49.74 49.72 562.50

49.72 49.70 590.63

49.70 49.68 618.75

49.68 49.66 646.88


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UI Cap Rates

16. The draft amendments a lso prop osed fo r rev iew o f UI c ap ra tes

due to c hange in the UI p ric e vec tor. The revised UI Ca p ra tes

proposed were as follows:

a .407.25 Paise/kWh for all generating stations using coal orlignite or gas supplied under Administered Price

Mec ha nism (APM) a s the fue l

b . 450.0 Pa ise/ kWh for the under d rawls by the buyer or the

beneficiaries in excess of 10% of the schedule or 250 MW,

whic heve r is less.

c .450.0 Pa ise/ kWh for the injec tion by the seller in e xc ess of

120% of the schedule subject to a limit of ex-bus

generation corresponding to 105% of the Installed

Capacity of the station in a time block and 101% of the

Installed Ca pac ity over a d ay.

d .165.00 Pa ise/ kWh for the injec tion b y a generat ing sta tion

other than the hydro generating station in excess of 105%

49.66 49.64 675.00

49.64 49.62 703.13

49.62 49.60 731.25

49.60 49.58 759.38

49.58 49.56 787.50

49.56 49.54 815.63

49.54 49.52 843.75

49.52 49.50 871.88

49.50 900.00

(Eac h 0.02 Hz step is eq uiva lent to 16.50 Pa ise/ kWh in the 50.2-50.00 Hz frequenc y range, 28.50 Pa ise/ kWh in 50 Hz to 49.8 Hz and28.12 Paise/kwh in frequency in the below 49.8 Hz to 49.5 Hzrange.)


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of the Dec la red Ca pac ity of the station in a time b loc k or

in excess of 101% of the a verag e Dec la red Ca pac ity over

a da y.

e.165.00 Pa ise/ kWh for the injec tion by the seller in exc ess of

ex-bus generation corresponding to 105% of the Installed

Capacity of the station in a time block or 101% of the

Installed Ca pac ity over a day

17. The responses to the p rop osed amendment were as und er:

(a ) NTPC has sub mitted tha t the Cap ra te of 407.25 Pa ise/ kWh /

(based on Energy charges of Farakka `. 3/ kWh) is less as Ene rgy

charges of Farakka has increased substantially (average 374.3

P/ unit). In view of shorta ge of c oa l, this may further inc rease. NTPC

has suggested that Unscheduled Interchange Cap Rate may be

spec ified as 490.91Ps/ kWh, correspond ing to the freq uenc y interva l

below 49.80 Hz and not below 49.79 Hz, considering the increase in

Energy Cha rge Rate.

(b) CEA ha s submitted tha t the UI c ap ra te for under d rawl in exc ess

of 10% of the sc hed ule should no t be m ore tha n`. 2.5 per unit and

seller injection in access of 120% of the schedule should also be

kep t to`. 2.5 per unit.

18. We ha ve c onsidered the sub missions of NTPC a nd CEA. As

rega rd s the sub mission o f NTPC, w e a re of the view tha t there is still

sufficient margin available even with higher energy charge due to

imported coal blending. However, on the UI Price vector the Cap


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rate is working out as 421.50 Paise/kWh. In view of this, the Cap rate

of 407.25 Pa ise/ kWh fo r a ll genera ting sta tions using c oa l or lignite o r

gas supp lied und er Administered Pric e Mec hanism (APM) a s the fuel

may now be raised to 421.50 Pa ise/ kWh. The c ap ra te for the

und erdrawls by the buyer or the benefic ia ries in exc ess of 10% of the

schedule or 250 MW, whichever is less and for the injection by the

seller in excess of 120% of the schedule, subject to a limit of ex-bus

generation corresponding to 105% of the Installed Capacity of the

station in a time block and 101% of the Installed Capacity over a

day, may be reta ined as 450.0 Pa ise/ kWh. There has been suffic ient

inc entive to support the g rid .

19. Ame ndme nt has a lso been prop osed to spec ify the grid

frequency for operation of limit of UI Volume from 49.7 Hz to 49.8 Hz.

There a re no spec ific c om ments of the stakeholders in this reg ard . In

our view, it would be necessary to revise the grid frequency for

operation limit of UI volume in view of narrowing of operating grid

frequency range.

Revision o f Additiona l UI Charges

20. The Ad d itiona l UI Charges were a lso rev iew ed and follow ing

add itiona l UI c harges were p rop osed in the d ra ft am end ment:

For over drawal below 49.7 Hz and up to 49.5 Hz -40% of the

Unsc heduled Interc hange Cha rge o f 900.0 Pa ise/ kWh


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For und er-injec tion b elow 49.7 Hz and up to 49.5 Hz-

20% of the Unscheduled Interchange Charge of 900.0

Pa ise/ kWh

20% of the UI Cap Ra te of 407.25 Pa ise/ kWh for the

generating stations using coal or lignite or gas supplied

und er Administered Pric e Mec ha nism (APM)

For over drawals below 49.5 Hz - 100% of the UI Charge 900.0

Pa ise/ kWh

For under-injec tion below 49.5 Hz

40% of the UI Cha rge of 900.0 Pa ise/ kWh 40% of the UI Cap Ra te of 407.25 Pa ise/ kWh for the


und er Administered Pric e Mec hanism (APM)

21. In response to the p rop osed amendme nt, the follow ing

responses have b een rec eived :

(a ) NTPC ha s submitted tha t the generat ing sta tions may be

exempted from additional UI charge in case of forced outages till

the revision of declared capacity/injection schedule after unit

tripping.

(b) Torrent Pow er and GMR Energy Ltd ., have sub mitted tha t the

pena lty or add itiona l UI should not be imp osed on STOA g enerators

and that any additional UI charges should not be imposed for start-

up pow er of plant d uring the testing period .


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(c ) BSES ha s sub mitted tha t the add itiona l UI for d isc oms should be

20 % and 40 % aga inst 40 % and 100 %.

(d ) UPPCL has submitted tha t the add itiona l UI c ha rges a re imposed

as pena lty in d isc riminato ry manner and it should b e withdrawn.

(e) Gujra t Urja Vikas Nigam Limited (GUVNL) ha s sub mitted tha t

charging of additional UI at the rate of 40% of UI rate (`9/unit) for

frequency below 49.7 Hz up to 49.5 Hz is wider band where Discoms/

beneficiaries will start getting instant trouble once frequency

desc end s immed ia te ly below 49.7 Hz and this troub le p ersists for over

d raw ing p ow er at rate of`. 12.60 / unit for frequenc y band 49.7-49.5

Hz. GUVNL has submitted that the Commission may divide this long

band into two parts i.e. 49.7-49.6 Hz & 49.6-49.5 Hz and apply 20% of

UI ra te (`9/unit) for freq uenc y below 49.7 up to 49.6 Hz and then 40%

of UI rate (` 9/unit) fo r freq uenc y below 49.6 up to 49.5 Hz. This will

p rovide suffic ient signa l to the ove r-d rawing entity to p roc ure p ow er

from ma rket. The a bove p rop osa l w ill a lso b e e noug h to w a rn the

ove rdrawing entity not to ove rd raw further when freq uenc y is further

deteriorating . Simila rly, c ha rg ing of a dd itiona l UI for freq uenc y below

49.5 Hz may be divided into two parts i.e. 49.5-49.2 Hz & below 49.2

Hz and 70% of UI rate (`. 9 /unit) may be applied for frequency

below 49.5 up t 49.2 Hz and then 100% of UI rate (` 9 /unit) for

freq uenc y below 49.2 Hz. The above submission of cha rg ing

additional UI for overdrawing of power is in light of the various facts


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like loa d shedd ing b y Utilities/ Disc oms, Transmission c orridor p rob lem,

Power evacuation strengthening/up-gradation and for

develop ment of p ower ma rket.

(f) KPTCL has sub mitted tha t the pena l ra tes when freq uenc y is

below 49.7 Hz and up to 49.5 Hz, wo rks out to be`. 12.6/ - and below

49.5 Hz, it is`. 18.0/ - and the existing pena l ra tes for freq uenc y below

49.5 and up to 49.2 Hz`. 12.222/- and for frequency below 49.2 Hz

the ra tes a re`. 17.46/ -. There is hug e a c c umula tion o f pena l c ha rges

with RPCs due to levy of high penal charges for over drawing

constituents and under injecting generators whereas payment for

ove r injec tion by genera tors for both C GS and othe rs a re pa id very

less. Instead of this, levying of penal charges may be reduced for

overdrawing constituents and under injecting generators and

ba lanc e the c an b e a chieved.

22. The a dd itiona l UI c ha rges have b ee n provided to d issuade the

beneficiaries and the buyers to overdraw from the grid when grid is

under distressed c ond ition. We ag a in reitera te tha t the b ene fic ia ries

are under no compulsion to overdraw from the grid. If they adhere

to their respective schedules, then there would be no UI liability or

any ad d itiona l UI liab ility ac c ruing to them w hateve r ma y be the g rid

condition. As discussed earlier in para 13 above, we have decided

to impose additional UI charges at 20% of Max UI Charge of `

9.00/kWh corresponding to the grid frequency of "below 49.5 Hz" for


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overdrawal in the frequency range. In view of this, Additional UI

c ha rges "below 49.5 Hz" ha s a lso been review ed . The Commission

has decided to continue with the existing additional UI charges

"below49.5 Hz and up to 49.2 Hz" and below 49.2 Hz.

23. Ac c ording ly, follow ing add itiona l UI c ha rges have been

specified:

For over drawal below 49.7 Hz and up to 49.5 Hz -20% of the

Unsc heduled Interc hange Cha rge o f 900.0 Pa ise/ kWh

For und er-injec tion b elow 49.7 Hz and up to 49.5 Hz-

10% of the Unscheduled Interchange Charge of 900.0

Pa ise/ kWh



und er Administered Pric e Mec ha nism (APM)

For over d rawa ls below 49.5 Hz and up to 49.2 Hz - 40% of the UICha rge 900.0 Pa ise/ kWh

For und er-injec tion b elow 49.5 Hz and up to 49.2 Hz

20% of the UI Cha rge of 900.0 Pa ise/ kWh




For over drawals below 49.2 Hz - 100% of the UI Charge 900.0

Pa ise/ kWh For under-injec tion below 49.2 Hz

40% of the UI Cha rge of 900.0 Pa ise/ kWh





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24. This would take c are of the conc ern of the stakeholders ha ving

regard to their conduct leading to improvement in the grid

frequency. However, if the Commission finds in future that

stakeholders are resorting to grid indiscipline, then the Commission

may review its decision and may impose higher additional UI

c ha rges below 49.7 Hz grid freq uenc y.

UI Cap for injec tion of Infirm Power

25. The p roposed amendments a lso introd uc ed UI Ca p ra tes for

injection of infirm power for generating units for testing and

c om missioning b efore COD of units dep end ing up on the type of fuel

used for power generation. It was proposed that infirm power

injected into the grid by a generator which has not identified abuyer for the infirm power during the testing prior to COD of units/

station from other generating stations shall be paid at UI rates for

pow er injec ted in to the g rid c onseq uent to testing for a period not

exceeding 3 months, subject to ceiling of Cap rates corresponding

to the fuel used for suc h g ene ra tion as spec ified in the Sc hed ule A

of this Reg ula tion. The follow ing UI c ap ra tes were p roposed inSc hedule A to the d ra ft amend ment:

Domestic c oa l : ` 1.65 / kWh sent o ut


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APM gas as fuel : ` 2.60 / kWh sent o ut

Imp orted Coa l/ RLNG : ` 3.30/ kWh sent out

Liquid Fue l : ` 9.00 / kWh sent o ut

It was also provided that in case imported coal is being

blended with the domestic coal then the ceiling rate of infirm

power shall be arrived at in proportion to the ratio of blending

based on the above rates of domestic and imported coal and

shall be subject to a further ceiling of` 1.90 / kWh ex-bus. It was

a lso p rovide d tha t in c ase the g ene ra ting sta tion uses na tura l gas

supplied under Administrative Price Mechanism (APM), Re-

gassified Liquid Natural Gas (RLNG) and Liquid fuel in combination

for power generation, then the ra te of infirm pow er sha ll be a rrived

a t in p rop ortion to the ra tio of fuel c onsump tion based on the ra tes

spe c ified abo ve.

26. The a bove p rovisions we re p rovide d in view of the amend me nt

of the clause 7 of Regulation 8 of Central Electricity Regulatory

Co mm ission (Grant o f Connec tivity, Long-Term Ac c ess and Med ium-

Term Op en Ac c ess in Inte r-Sta te Transmission and rela ted ma tte rs]

Reg ula tions 2009 (hereinafter refrerred to as Co nnec tivity

Regulations) which provide for limit on the period for injection of

infirm power in to the grid for the purpose of testing/ Commissioning

of the units and to trea t suc h infirm pow er injec tion as UI and to be

paid at UI rates subject to ceiling of UI Cap rates as specified in UI

Reg ula tion. Therefo re, d ra ft a mendments to the UI Reg ula tion


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introduced the UI Cap rates for injection of infirm power for

generating units for testing before COD based on fuel used for

power generation.

27. The Co mmission has dec ided a maximum period of six month

for which injec tion o f infirm p ow er c an be permitted before the d ate

of c om merc ia l op eration. The d eta iled rea sons are g iven in the

Sta tem ent o f Rea sons for the sec ond ame ndment to the Connec tivity

Regulat ions. Therefore, the c omments of stakeholders in response to

simila r provision in d ra ft UI reg ula tions have not been repea ted .

28. With reg ard to the UI Ca p ra tes for injec tion of infirm power for

generating units for testing before COD based on fuel used for

pow er gene ra tion, the stakeholders have c om me nted as follow s:

(a ) Hindustan Elec tric ity Generation Co . Pvt. Ltd . has submitted tha t

presently RLNG in India is benchmarked with JCC at around 14.5%

slop e. The p reva iling ma rket rate for RLNG is a round $18 land ed per

mmBtu. Also no Gas based Generator has tied up long term gas

supply agreements due to high volatility in the RLNG prices. It has

been submitted that a mechanism should be devised in order to

capture such cases of high price of fuel cost keeping in mind the

vo la tility in the RLNG market.


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(b ) Southern Reg iona l Power Comm ittee ha s submitted the

following:

i) A new sentence may please be added that for UI

computation generator shall furnish the blending ratio by

Thursday for the past week to RPC Sec reta ria t. If the b lend ing

ratio is not communicated, then the ceiling rate would be

restric ted to 1.65/ kWh .(Rate for do mestic c oa l/ gas)

ii) A new sentence may please be added that for UI

computation generator shall furnish the ratio of fuel

c onsumption by Thursday for the past wee k to RPC Sec reta ria t.

If the ra tio o f fuel c onsump tion is not c om munica ted , then the

ceiling rate would be restricted to 2.60/kWh. (rate for APM

gas as fuel)

(c) Power Company of Karnataka has submitted that the GCV &

Cost considered for arrival of the rate is not specified. In case of

generators selected under competitive bidding route, based on

levelised tariff, the recovery of short fuel cost is not possible, since

quoted tariff shall remain for 25 years. Under such circumstances

fac to ring of c ost in the ta riff does no t a rise. Therefore it is suggested

that the a c tual cost p ayment o r ma ximum c eiling ra te, whic hever is

low er sha ll be c onsidered . The p erce ntage o f fuel and GCV

considered for arrival of` 1.90/kWh as ceiling rate is not specified

which may be required for calculation of rate in case of different

ra tio o f b lend ing of c oa l used for infirm p ow er.


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(d) NHPC has submitted that nothing has been mentioned in the

clause regarding the rate of infirm power from hydro generating

stations. It needs to be confirmed that rate of infirm power for hydro

sta tions will be app lic ab le UI ra te.

(d ) NTPC has sub mitted tha t the energy injec ted as infirm pow er is

proposed to have different UI price ceiling rates depending on fuel.

Looking from the point of view of the recipients of such power,

differential price does not make sense. Moreover, the cost of suchtesting is an antic ipa ted expend iture o f the generato r and p aying UI

rate for the same is not justified. In fact one could also argue the

cost of such testing should be borne entirely by the generator. A

common ceiling rate corresponding to the UI rate for the frequency

band of 49.98-50.00Hz (` 1.55/kWh) may be adequate as the

generator has no imp lic a tion of nega tive UI. The intent o f de c la ringcommercial operation is that as soon as generator is reasonably

ready to inject power, it should declare its COD and sell the power

through commercial mechanisms. Infirm power should only be

allowed for making generator ready for COD. It should not be used

as a side mechanism to get additional commercial gains. But

because a generator is injecting power into the grid which shall be

utilized by customer, it may be compensated, but this should not

c rea te a ny motiva tion to generate a dd itiona l c om merc ia l ga ins.


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(e) LANCO has submitted that in view of severe coal shortage in the

c ountry, som e of the develope rs a re forc ed to use e-auc tion c oa l to

supp lem ent the c oa l req uirem ents. Thoug h e-auc tion c oa l is

indigenous, its rate is almost equal to imported coal. LANCO has

requested to consider this aspect before fixing any ceiling rates for

the infirm p ow er injec ted beyond the a llow ed testing time. How eve r,

it is essentia l to p rov ide more c la rity on ho w the c eiling UI ra te will be

arrived a t in c ase a c om bina tion o f fuels a re used and an authorized

agenc y should b e d esigna ted to c ertify the fuel mix used .

(f) Shree Ceme nt Limited has submitted tha t the p rop osed c ap is

very low as c om pared to the c ost of gene ra tion o f po wer. The

variable cost of power generation based on domestic coal or

imported coal is higher than the cap proposed above. A power

plant injecting infirm power into the grid will be incurring loss if the

payment for such power is below its variable cost of generation,

which in case of imported coal will not be less than ` 3.50/unit

against cap of ` 3.30/ unit p roposed . Though the d ra ft reg ula tion

incorporates provision for different rates based on utilization of

d ifferent fuels, it does not spec ify the mec ha nism for asc erta ining the

actual fuel usage by generators. Many generators are using other

fuels like pet coke, lignite etc. for which no price has been fixed in

the proposed regulations. As such a new category Others should

a lso be inc orpora ted to c a ter to g ene ra tors using d ifferent fuels.


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(g) MB Power (MP) Ltd. has submitted that in the current scenario,

the fuel price is determined by the market forces which are very

dynam ic and volatile in nature. Therefore, to p rovide a c eiling on the

rates of infirm power based on various fuels does not appear to be

prudent and realistic, and it may cause the project developers

substantial financial losses. MB POWER has submitted that instead of

capping the rates of infirm power, fuel cost should be allowed as a

100% pass through for the purpose of calculation of rates of infirm

pow er. In this ma nner, there w ill be no inc entive on the gene ra tor to

prolong this testing period, however, at the same time; it will not be

penalized in the event the actual fuel consumption charges are

recovered. An appropriate mechanism may be devised to

determine the actual fuel costs incurred, for example, audited

statement certified by the equipment supplier/EPC contractor or

other engineer conducting the tests and invoices duly certified by

the sta tutory aud itor of the gene ra tor.

(h) Neyve li Lignite Co rporation Limited has submitted tha t the sa le of

infirm pow er a t UI ra te simp lifies the c omme rc ia l mec hanism, sinc e it

will not interfere with REA computations. However, if the Commission

feels that injection of infirm power for long periods is because of

attractive UI rates, the UI rate may be replaced with Energy Cost of

respec tive sta tions for ge nera torswho have not identified purc hasers

with a pprop ria te amendme nt to Reg ula tions 11 of Ce ntra l Elec tric ity


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Regulato ry Co mmission (Terms and Cond itions of Ta riff) Regulations,

2009, if wa rranted .

(i) Torrent Pow er has submitted tha t the c ap ra te for domestic gas

should b e inc rea sed to 2.60/ kwh sent out. The c ap ra te for pit head

generating station and non-pithead station should be different,

hence, the rate of ` 1.65/kwh would be for pithead generating

sta tion a nd for non-p it hea d gene ra ting sta tion, the c ap ra te should

be inc rea sed to the e xtent o f ac tual transportation c ost inc urred per

kwh. The c ap ra te p resc ribed for imported RLNG is a lso very low

compared to the actual variable cost and therefore, it should be

inc rea sed to a t lea st`5/ kwh sent o ut.

(j) Adani Power Limited (AEL) has submitted that during high

freq uenc y c ond itions, the g enerator would not b e a b le to rec over its

fuel cost from UI charges and hence will have to make up for this

revenue loss with the help of UI charges during low frequency

conditions. Also, the cost of fuel for infirm energy will be very high

owing to poor station heat Rate during stabilization period. Now,

app lying c ap on UI c harges for injec tion o f infirm p ow er would b e a n

injustice to the genuine generators. Hence, AEL has suggested to

reta in the c urrent p rov ision related to set tlem ent o f injec tion of infirm

pow er in to the g rid .

(k) CEA has suggested that Cap Rates for infirm power injected


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during testing p rior to CoD of the unit have been spec ified . How eve r,

no Ca p Rate has been spec ified for hydro gene ra ting units injec ting

infirm pow er. It mea ns tha t Hydro gene ra ting sta tions c an earn up to

` 4.50/unit as per Clause 2(c). It has been submitted that the

Commission may specify Cap Rates for infirm power injection by

hydro generating stations prior to CoD. In this connection, CEA has

c ited the instanc es of Unit-3 of Jayp ee e Ka rc ha m Wang too HEP and

Unit-1 and Unit-2 of Ma lana II HEP which ha ve been sync hronised but

have not declared commercial operation. CEA has suggested that

UI Cap Rate for infirm injection by hydro stations prior to CoD should

be capped a t` 1.65/unit.

(l) POSOC O has submitted tha t to d isc ourage injec tion of infirm

pow er for p rolong ed period , and to ta ke c are o f infirm na ture o f the

injection, UI rate for all generating stations/sellers (irrespective of

type/source of fuel) prior to COD may be capped at the rate

c orrespond ing to freq uenc y of 50 Hz. whic h, as per prop osed UI ra te

is equivalent to ` 1.65. A uniform cap rate for infirm power is also

nec essa ry from the stakeho lders perspec tive. POSOCO has further

submitted that after the generator has declared COD, it is possible

tha t it ha s a Long Term Ac c ess (LTA) to the Inter Sta te Transmission

System (ISTS) b ut no long te rm PPA. Under suc h situa tion, it is possible

that the ge nera tor c ontinues to injec t UI and ge t pa id for a t norma l

rates. In that case, the generators may declare COD of their units

right from day one of synchronization and continue to inject under


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UI. It has been suggested that this issue be addressed in the UI

Regulations possibly by specifying a cap rate, which provides

sufficient incentive for harnessing available generation and at the

same time d isc ourages c ontinued injec tion under UI.

29. The C om mission is of the view tha t it would not be feasib le to

specify one ceiling rate for all types of fuel and therefore, ceiling

rates as proposed shall be adopted. No ceiling rate was specified

for the hydro gene ra ting sta tions and in our view , the c eiling ra te for

the hydro generating station shall be ` 165 Paise/kWh, the same as

for the c oa l/ lignite ba sed generating sta tion. The Com mission a lso

find s merit in the c ontention o f CEA a nd SRPC with regard to the

c onc ern ab out d ec id ing the b lend ing ra tio a nd its verific a tion. The

Commission is of the view that it is possible for the generator to

arrange suffic ient quantity of m a in fuel like d om estic c oa l or natural

gas for the purpose of testing and commissioning activities and as

suc h, there ma y not b e a ny nec essity of b lend ing of imp orted c oa l

or mixing o f gas with RLNG or the liquid fuel for the purpose o f testing

and commissioning. As such, provision relating to blending of

imported coal and mixing of gas with RLNG or the liquid fuel for the

purpose o f testing and c om missioning ha s been d one awa y with. It is

also not feasible to allow actual variable cost as it would not be

possible for the Commission to determine it for the merchant

generators.


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30. As rega rds the c onc ern of POSOCO , it is c la rified tha t it has

been clearly provided in Connectivity Regulations that mere

connectivity shall not entitle any entity to interchange power with

the grid without seeking open access and as such, a generator has

to obtain some form of access after the COD to inject power into

the g rid .

Inter-Regional UI adjustment and Sharing of Inter Regional UI

charges

31. Eastern Regiona l Load Despa tc h Centre (ERLDC) has sub mitted

that from 2003 till 3.5.2010, settlement of UI between two

asynchronously connected regions was being computed at

respec tive reg iona l UI ra te. However, w ith fo rma tion of NEW Grid , the

only async hrono us op eration was betw een the Southe rn a nd NEW

Grid throug h HVDC Links between SR and ER, and SR and WR. Due to

the na ture of async hrono us inter-c onnec tion betw een Southern Grid

and NEW Grid , a d ifferential UI was being g ene ra ted and the same

was being credited to the inter-regional exchange (IRE) pool

ac c ount w hic h wa s shared betw een the respec tive reg ions on 50:50

basis. The benefit so a c c rued was passed on to the bene fic ia ries of

each region in proportion to their liability to pay the transmission

c ha rges. Simila r prac tic e was a lso followed for UI set tlem ent

betwee n ER and NR poo l for exchange betwee n ER and NR till 2006

when NR Grid was op erat ing async hronously w ith rest o f the Grid .


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32. Central Elec tric ity Regulatory Commission (Ind ian Elec tric ity

Grid Code) Regulations, 2010 (Grid Code) came into effect from

3.5.2010. Para 16 of Annexure I of the Grid Code dealing with

Comp lem enta ry Comm ercial Mec hanism p rovides as under:

16. Interfaces for Scheduling and UI Accounting In Inter-regional Exchanges:

1. The regional boundaries for scheduling, metering and UI accounting of inter-regional exchanges shall be as follows:

Eastern Region end of inter-regional links between Eastern Region andSouthern, Western and Northern Regions.

North-eastern end of inter-regional links between Eastern and NorthEastern Region Western Region end of inter-regional links between Southern and WesternRegion Western Region end of inter-regional links between and Northern andWestern Region.

2. No attempt shall be made to split the inter-regional schedules into link-wiseschedules (where two regions have two or more interconnections).

33. ERLDC has submitted tha t a fter Grid Co de came into forc e,

SRPC unila tera lly disc ontinued the ea rlier p rac tic e o f computa tion of

inte r-reg iona l UI based on d ifferential frequenc y. ERLDC ha s

submitted that the intent of para 16 of Annexure I to the Grid Code

was to compute energy drawl based only on the energy meter

read ing of Eastern Region or Western Region end s.

34. ERLDC has furthe r sub mitted tha t pa ra 16 of Annexure I does

not bar computation of UI charges at the respective frequencies of

the a sync hronously connec ted reg ions. The d isc ontinuat ion o f the

existing p rac tic e of UI c om puta tion me thod ology b y SRPC was thus


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in contravention of the objective of achieving optimal economic

operation. This was done without a ny d irec tives from the Co mm ission

or intimation to the Commission and without any prior discussions

with o ther RPCs (viz. ERPC or WRPC). Consequently, the d ifferentia l UI

amount is being generated now, instead of being shared on 50:50

basis betw een SR and ER/ WR pools gets entirely c red ited to the SR UI

pool. Suc h lost b enefits for Eastern a nd Western reg iona l

bene fic ia ries with effec t from 3.5.2010 need be c om pensa ted by the

Southern Reg ion w ith ret rospec tive e ffec t. It is apprehended tha t

suc h p rac tic e as unila terally adop ted by SRPC ma y restric t ec ono my

exchanges between ER-SR and WR-SR which is detrimental to

optimal utilization of national resources. ERLDC has submitted that

esse

ui charges rates unsheduled inter change charges

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