3D FREQUENCY OF SR AUG 2004

1. 3D FREQUENCY OF SR AUG 2004 3D LOAD CURVE OF GOA SCATTER PLOT OF SR FREQUENCY COMPARISION OF CG AND SR FREQ HISTOGRAM OF SR FREQ WITH PRICE VARIABLE COST ALL REGIONS DEMAND OF GOA AN ANALYSIS 3D LOAD CURVE OF GOA DEMAND OF GOA AN ANALYSIS 3D LOAD CURVE OF GOA

2. TERMS OF REFERENCE • To undertake a review, in commercial term, of the total power situation comprising the availability of power, cost of power, utilization within the State of Goa, forecasting and scheduling activities, availability based tariff for unscheduled interchanges, availability of surplus power etc. • To examine the legal framework and make an assessment of business potential taking into account the prevailing environment. • To make recommendation regarding a long term policy for power trading and to suggest a trading mechanism including delegation of suitable trading powers to appropriate levels within the electricity department.

3. 16th Economic Power Survey (EPS) • 9.14 The CERC has implemented the Availability Based Tariff in all the five electrical regions of the country at Inter-State level. The ABT facilitates merit order dispatch of various generating stations having different variable costs ………… The UI mechanism facilitates the spot sale and purchase of electricity into or out of the electricity grid and does not require the services of a trader. As UI mechanism is an alternative to formal trading it provides a sort of benchmark price for the trading of electricity……..

4. PRESENT ALLOCATION TO GOA FROM CENTRAL SECTOR PLANTS

5. GOA MAX ELECTRICITY TARIFF

6. TYPICAL DEMAND CURVE OF GOA 16TH EPS EXTRACT UNDERDRAWAL(UI TRADE) OR BILATERAL TRADE IN THIS ZONE

7. ADDITIONS TO CAPACITY

8. SOME QUESTIONS • How much is the surplus power? • What is the time and season when surplus power is available? • What is value of the surplus power? • What is the cost of the surplus power? • What are the options available for commercial treatment of this surplus power?

9. STRATEGIES FOR TRADE • AVOID EXTENDED 24 HOUR BILATERALS • HARNESS DIVERSITY TO CONTRACT FOR PEAK • BACK TO BACK CONTRACT • UI WOULD BE COSTLY • INNOVATIVE, FLEXIBLE PRODUCT MIX • CONTRACT FOR DIFFERENCE (CFD) • BILATERAL ON UI+ RATE WITH TRADER • TRADE WITH POOL (UI) • PARTLY TRADE WITH THE POOL AND PARTLY WITH TRADER • RETURN FROM UI CAN BE A BENCHMARK FOR BILATERALS

10. TRADING WITH THE POOL • ‘THE POOL’ IS THE 30,000 MW CENTRAL GRID • UNSCHEDULED INTERCHANGE ( UI) IS AN ESTABLESHED PRACTICE • PRICE IS KNOWN – TRANSPARENT MECHANISM • NO FEAR OF RIGGING • NO NEED FOR NEGOTIATIONS / FORMAL CONTRACT • FLEXIBILITY REGARDING QUANTUM AND DURATION • ARBITRAGE POSSIBILITIES • COMES AT A COST – SUPPLY DISRUPTION • IN-BUILT PAYMENT SECURITY MECHANISM MORE ON THE UI MECHANISM…..

11. TRADING WITH THE POOLISSUES • UI PRE-SUPPOSES A ROBUST TRANSMISSION SYSTEM • ACCURATE LOAD FORECAST • GOA LACKS HYDRO FLEXIBILITY • MEETING THE PEAK -ERRORS COULD BE COSTLY • PREDICTABILITY OF POOL COST • REDUCE REQUIREMENT ONLY WHEN GRID FREQUENCY IS ABOVE VARIABLE COST

12. TRADING WITH THE POOL • GOA NEEDS A MECHANISM TO DEAL WITH ‘SURPLUS’ AT NON-PEAK HOURS • LESS REQUISITION FROM CHEAP PIT-HEADS DOES NOT MAKE ECONOMIC SENSE • BILATERAL TRADING – HAS ITS ISSUES • UI MECHANISM – PRICE PREDICTABILTY • COMBINATION - CONJUNCTION

13. LEGAL ISSUES: EXTRACTS FROM ACT • As per Electricity Act 2003 – Para 2(71) – ‘trading’ means purchase of electricity for resale thereof and the expression ‘trade’ shall be construed accordingly. • As per Electricity Act 2003, Trading is a licenced activity. However, as per Para (4) – Section 14 – in case appropriate Government transmits electricity or distributes electricity or undertakes trading in Electricity whether before or after commencement of this Act, such Government shall be deemed to be a Licencee under this Act but not required to obtain Licence under this Act.

14. LEGAL ISSUES: EXTRACTS FROM ACT • Para 32(2)(a) of the Act also stipulated that SLDC will be responsible for optimum scheduling and dispatch of electricity. • As per Section 31(2) no SLDC shall engage in the business of Trading in Electricity. • Section 39 of the Act has specified that State Government may notify the Board or the company as a State Transmission Utility provided that the State Transmission Utility shall not engage in the business of Trading in Electricity. • Trading is a Licenced activity as per the Act 2003. • There is provision for State Electricity Regulatory Commission in each of the State as stipulated vide para 85. The Function of the State Commission as enumerated in section 86(b) is to regulate electricity purchase besides fixing trade margin in trading of electricity and many other associated issues. So far though SERC has been constituted/established by the Govt. of Goa, the same is not functioning in the absence of

15. INSTITUTIONAL CHANGES • TRADING IS A FULL TIME JOB • ENGINEERING/ECONOMICS/STATISTICS – SKILL SETS • EMPOWERMENT • CONCEPT OF PROFIT CENTRE • BENCHMARKING WITH ‘WHAT-IF’ UI RETURN • SLEEK SETUP, PREFERABLY AUTONOMOUS – RESPONSIVE TO THE MARKET • THOROUGH UNDERSTANDING OF GOA’S LOAD – LOAD GROWTH ETC.

16. RECOMMENDATIONS • LONG TERM AND SHORT TERM LOAD FORECAST. • JUDICIOUS CAPACITY BOOKING – MEET RISING PEAK • MAKE FULL USE OF ALLOCATIONS FROM PIT HEAD STATIONS • ATTEMPT TO RESTORE ANY SURRENDERED/UN-UTILISED CAPACITY ALLOCATION • DAY-TO-DAY OR SEASONAL SURPLUS TO BE CONTINUOUSLY MONITORED. • BENCH MARK PRICE FOR EXPLICIT SELLING: MONITOR ALL FACTORS • FREQUENCY – UI RATE • OA CHARGES • UI MECHANISM AS FALLBACK. • TO REVAMP THE INSTITUTIONAL ARRANGEMENT • NEED FOR ROBUST TRANSMISSION SYSTEM WHICH IS THE KEY FOR OPTIMUM UTILIZATION. • INNOVATIVE PRODUCT MIX • TRAINING AND EXPERTISE BUILDING.