Computation of tariff under open access for bulk customer in a state

Computation of tariff under open access for bulk customer in a state POSOCO, ERLDC

Presentation Outline Introduction Model Terms and Conditions of Intra-State Open Access Regulations, September 2010 Case Studies Issues in Intra – State Open Access System Operator Training

Introduction System Operator Training

DEFINITION • Electricity Act 2003: Open Access is defined as “Open access” means the non-discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission.” 5

EA 2003: Provisions for Grant Of Open Access Section 38(2)(d): CTU and functions Section 39(2)(d): STU and functions Section 40(c): Duties of Transmission Licensees Section 42(2): Duties of Distribution Licensees and Open Access

EA 2003: Provisions for Grant Of Open Access Section 42(2) Distribution Licensee (2)The State Commission shall introduce open access in such phases and subject to such conditions, (including the cross subsidies, and other operational constraints) as may be specified within one year of the appointed date by it and in specifying the extent of open access in successive phases and in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies, and other operational constraints: ………. Provided also that the State commission shall, not later than five years from the date of commencement of the Electricity (Amendment)Act, 2003, by regulations, provide such open access to all consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one megawatt.

National Electricity Policy, 2005 – Section 5.4.5 The Electricity Act 2003 enables competing generating companies and trading licensees, besides the area distribution licensees, to sell electricity to consumers when open access in distribution is introduced by the State Electricity Regulatory Commissions. As required by the Act, the SERCs shall notify regulations by June 2005 that would enable open access to distribution networks in terms of sub-section 2 of section 42 which stipulates that such open access would be allowed, …. ……Section 49 of the Act provides that such consumers who have been allowed open access under section 42 may enter into agreement with any person for supply of electricity on such terms and conditions, including tariff, as may be agreed upon by them. ……. While making regulations for open access in distribution, the SERCs will also determine wheeling charges and cross-subsidy surcharge as required under section 42 of the Act. System Operator Training

Tariff Policy • Section 6.3: Harnessing Captive Generation • Wheeling charges and other terms and conditions for implementation should be determined in advance by the respective State Commission, duly ensuring that the charges are reasonable and fair. • Grid connected captive plants could also supply power to non-captive users connected to the grid through available transmission facilities based on negotiated tariffs. Such sale of electricity would be subject to relevant regulations for open access • Section 6.4: • Non-Conventional Energy Sources, including co-generation • Section 8.5: • Calculation of Cross Subsidy Surcharge and Additional Surcharge for Open Access System Operator Training

Status of Open Access Implementation (source: FOR)

Model Terms and Conditions of Intra-State Open Access Regulations, September 2010 Forum of Regulators System Operator Training

Contents Preliminary Connectivity General Provisions for Open Access Application Procedure and Approval Open Access Charges Scheduling, Metering, Revision and Losses Imbalance and Reactive Energy Charges Commercial Matters Limited Short Term Open Access Information System Open Access to Generator Connected to Distribution System Miscellaneous System Operator Training

Definition of Open Access, OA Customer “Open access” means the non discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a generating company in accordance with these regulations and includes long term access, medium-term open access and short-term open access. "Open access customer" means a consumer, trader, distribution licensee or a generating company who has been granted open access under these regulations. System Operator Training

Categories of Open Access Consumers The application procedure, application fee and the time frame of processing request by eligible consumers seeking Open Access shall be based on the following criteria • (1) System to which connected • (a) Intra-State transmission system • (b) Distribution system • (2) Inter-se location of drawal and injection points • (a) Both within the same distribution system • (b) within the State but in different distribution systems • (c) In different States • (3) Duration of Open Access • (a) Long term access • (b) Medium-term open access • (c) Short-term open access System Operator Training

Categories of Open Access Consumers Consumer STU DISCOM Connection Point Inter-State Intra-State Intra-State (within DISCOM) Location of drawal Point STOA MTOA LTA STOA MTOA LTA Any OA Period of OA Nodal Agency SLDC STU STU RLDC CTU CTU DISCOM

Eligibility for Open Access • Open access shall be permissible to the customers seeking for open access capacity upto which SERC has introduced open access and • connected through an independent feeder emanating from a grid substation of licensee or • industrial feeder provided that all the customers on such industrial feeder opt for open access and having simultaneous schedule of drawal under such open access. • Consumers who are not on independent feeders, shall be allowed open access subject to the condition • that they agree to rostering restrictions imposed by utility on the feeders serving them.

Application procedure and approval (1) Consumer connected to Distribution System Regulation 12

Application procedure and approval (4) Consumer connected to Intra-State Transmission System Regulation 12

Charges Payable for Open Access Transmission charges Scheduling and system operation charges payable to State Load Dispatch Centre (SLDC) Wheeling charges Cross subsidy surcharge Additional Surcharge Standby charges Imbalance and Reactive Energy Charges (as applicable)

Transmission charges • Inter State – As per CERC Regulations • Intra-State : • Transmission charges shall be payable on the basis of contracted Capacity/ Scheduled Load or actual power flow whichever is higher. • Transmission Charges = ATC/(PLS T X365) (in Rs./MW-day) Where, • ATC= Annual Transmission Charges determined by the Commission for the State transmission system for the concerned year. • PLST= Peak load projected to be served by the State transmission system in concerned year. • For Open Access for a part of a day, the transmission charges shall be payable on pro-rata basis

Scheduling and system operation charges payable to State Load Despatch Centre (SLDC) • In respect of inter-State open access • Long term access or Medium term open access • RLDC fees and charges as specified by the Central Commission. • SLDC fees and charges as specified by the Commission under sub-section (3) of section 32 of the Act. • Short-term open access • RLDC and SLDC charges as specified by the Central Commission. • In respect of intra-State open access • Long term access or Medium term open access • SLDC fees and charges as specified by the Commission under sub-section (3) of section 32 of the Act. • Short-term open access • A composite operating charge @ Rs.2,000/- per day or part of the day shall be payable by a short-term open access customer for each transaction to the SLDC or as determined by the Commission from time to time.

Wheeling charges • Wheeling charges shall be payable on the basis of contracted Capacity/ Scheduled Load or actual power flow whichever is higher. • Wheeling Charges = (ARR – PPC – TC) /(PLSD X365) (in Rs./MW-Day) Where, • ARR=Annual Revenue Requirement of the distribution licensee in the concerned year • PPC=Total Power Purchase Cost of distribution licensee in the concerned year • TC =Total transmission charges paid by distribution licensee for State and Inter-State transmission system for the concerned year • PLSD=Total Peak load projected to be served by the concerned distribution system in the concerned year • For Open Access for a part of a day, the wheeling charges shall be payable on pro-rata basis

Possible Scenario • This section elaborates various scenarios of location of open access generators and their consumers and the consequent applicability of transmission and wheeling charges. The scenarios and the applicability of charges shall be as below • Scenario 1: Generator is connected to Transmission network (EHT voltages), while the consumer is connected to the distribution network (33kV and below) of Distribution Licensee: The scenario shall attract both transmission and wheeling charges since power required by the open access consumer will flow downstream from the transmission network through distribution network up to the consumer’s connection. • Scenario 2: Generator is connected to distribution network (33kV or below) of Distribution Licensee, while the consumer is connected to the transmission network (132kV or above): In this scenario, the consumer’s requirement will be met by power flow over transmission network alone. The power generated by the open access generator will be locally consumed within the Discom and will not flow upstream to the open access consumer. Hence, such transactions shall attract only the transmission charges.

Possible Scenario Scenario 3: Both Generator and consumer are connected to the transmission network (132kV or above): Only transmission charges shall apply, since there is no usage of distribution network. Scenario 4: Both generator and consumer are connected to the distribution system of any of the Distribution Licensee: The power generated by the open access generator will be consumed within the Discoms under the conditions of uniform retail tariff throughout the state and hence it will contribute to meeting the demand of the open access consumer. Therefore, there is no additional usage of transmission network in this transaction. Hence, such transactions shall attract only the wheeling charges.

Possible Scenarios Source: MPERC Order on Determination of Wheeling Charges and Cross Subsidy Charges (SMP 101/10) System Operator Training

Cross subsidy surcharge (1/2) Cross subsidy Surcharge to be levied on open access customers as determined by the Commission keeping in view the loss of cross-subsidy from these customers opting to take supply from a person other than the incumbent distribution licensee. Further submitted that the methodology has been prescribed in the National Electricity Policy

Cross subsidy surcharge (1/2) • Surcharge should be computed by the Tariff Policy formula. S= T- [C (1+L/100)+D] Where • S is the surcharge • T is the Tariff payable by the relevant category of consumers; • C is the Weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power • D is the Wheeling charge in per kWh basis • (to be derived from the wheeling charge in Rs./MW-Day referred to in Regulation 22 ) • L is the system Losses for the applicable voltage level, expressed as a Percentage

Cross subsidy surcharge (2/2) • In case the formula gives negative value of surcharge, the same shall be zero. • The Commission may fix a lower surcharge in the situation of shortages and load shedding by the distribution licensee. • Cross subsidy surcharge so determined by the Commission shall be reduced by 20% every year at a linear rate. • In case power supply position or the consumer load seeking open access changes drastically, the Commission may review the Cross Subsidy Surcharge as and when required. • In order to ensure regulatory certainty to a open access consumer applicant, any change in cross-subsidy surcharge level should be made applicable only to the new applicants and the open access already sanctioned should not be disturbed.

Additional Surcharge The open access customer shall also be liable to pay additional surcharge on charges of wheeling, in addition to wheeling charges and surcharge, to meet the fixed cost of the distribution licensee arising out of his obligation to supply as provided under sub-section (4) of section 42 of the Act in case open access is sought for receiving supply from a source other than the distribution licensee of his area of supply. This additional surcharge shall become applicable only if the obligation of the Licensee in terms of power purchase commitments has been and continues to be stranded or there is an unavoidable obligation and incidence to bear fixed costs consequent to such a contract. Any additional surcharge so determined by the Commission shall be applicable only to the new Open Access applicants.

Standby Charges 5.1 Proposal of the Commission Commission has proposed tariff applicable to the category of consumer for providing standby arrangements by the licensee for open access consumer. In cases where temporary rate of charge is not available for that consumer category in case of outages of generation open access, standby arrangements should be provided by licensee on payment of tariff applicable to that category. But in the Tariff Policy it is clearly spelt out that stand by arrangements should be provided by licensee on payment of tariff for temporary connection to that consumer category as specified by the appropriate Commission. Commission decides that the average rate (including both fixed and energy charges) shall be payable by consumers in the tariff category applicable to them as standby charges

Standby Charges • Standby arrangements in cases of outages of generator supplying to open access customer under open access. • Standby arrangements for a maximum period of 42 days in a year, subject to the load shedding as is applicable to the embedded consumer of the licensee • Standby charges at the temporary rate of charge for that category of consumer subject to the condition that such tariff shall not exceed the highest consumer retail tariff. • In cases where temporary rate of charge is not available for that consumer category, • the standby arrangements shall be provided by the distribution licensee for a maximum of 42 days in a year and on payment of fixed charges of 42 days and energy charges for that category of consumer in the prevailing rate schedule. • In case of stand by arrangements sought by continuous process industries, the licensee shall charge on the basis of actual costs involved in arranging power. • Open Access customers would have the option to arrange stand-by power from any other source.

Imbalance settlement • With load of less than 10 MW • The difference between the applicable sanctioned Open Access load and the actual drawal shall be accounted through the Time of Day (ToD) Meters on monthly basis and settled at the rate of the imbalance charge as determined by the Commission (where imbalance charge has not been determined by the Commission, UI rate as determined by the Central Commission shall be applicable). • In case of under drawal as a result of non availability of the distribution system or unscheduled load shedding, the open access consumer shall be compensated by the distribution licensee at the average power purchase cost of the distribution licensee. • With load of 10 MW and above • Settled based on the composite accounts for imbalance transactions issued by SLDC on a weekly cycle based on net metering in accordance with the rates specified by the Commission.

Commercial Matters (1/3) • Billing, collection and disbursement • Inter-State transactions: • Short-term Open Access • for use of CTU and STU systems as per CERC Regulations • for use of distribution system open access customer shall pay the charges payable to the distribution licensee within 3 days from the grant of the short-term open access by the nodal agency. • Long-term access and medium- term open access • Billing, collection and disbursement of charges payable to RLDC as per CERC Regulations. • Bills towards the charges payable to SLDC shall be raised by the STU/SLDC directly to the open access customer connected to STU and to the distribution licensee in respect of the customers connected to the distribution system. • Distribution licensee shall raise the bill with the open access customer connected to it within 3 days of receipt of bill from SLDC. • Open access customer connected to the distribution licensee shall pay the charges within five days of receipt of bill from distribution licensee. • The distribution licensee shall disburse the amount payable to STU/SLDC on a monthly basis. • Open access customer connected to the STU shall pay the bills within five working days of receipt of the bill.

Commercial Matters (2/3) • Intra-State transactions: • Short-term Open Access • The short-term open access customer shall deposit with SLDC the transmission charges and operating charges within 3 working days of grant of the short- term open access by SLDC. • In addition to the above, the short-term open access customer connected to distribution system of a distribution licensee shall also pay to SLDC, the charges payable to the distribution licensee within 3 days from the grant of the short-term open access by the nodal agency. Such charges would be disbursed to the distribution licensee on a weekly basis. • Long-term and Medium-Term open access • SLDC, transmission licensees and distribution licensee, where applicable, shall communicate to STU the details of the bills due to them by the 3rd day of the succeeding calendar month. • STU shall separately indicate the above charges and raise the bill with the open access customer, together with the charges receivable by it, if any, before the 5th day of the above month. The open access customer shall pay the charges within 7 days from the date of receipt of the bill. STU shall disburse the charges payable to SLDC, transmission licensee and distribution licensee on a monthly basis.

Commercial Matters (3/3) • Late payment surcharge • Delayed in payment by a open access customer beyond the due date, a late payment surcharge at the rate of 1.25% per month shall be levied. • Payment Security Mechanism • In case of long-term access and medium-term open access, the applicant for open access will open an irrevocable Letter of Credit (LC) in favour of the agency responsible for collection of various charges for the estimated amount of various charges for a period of two months.

Case Studies System Operator Training

Sample Surcharge calculation for FY 2010-11

LT & ST Transmission charge calculations WBSETCL(F.Y. 2010-11) Revenue Recoverable through Tariff Rs. 67284.35 Lakhs Average System Demand on the basis of average of the daily peak 4205.42 MW LT charges  Rs. 67284.35 lakh / (4205.42x12) = Rs. 1,33,329/MW/month Rate for short-term users Rs. (1,33,329 x 0.25)/30 = 1111.08Rs./MW/day RLDCS Rs.80/MWH as not declared in Rs./MWH format System Operator Training

LT & ST Transmission charge calculations OPTCL(F.Y. 2011-12) Net Annual Revenue Requirement (Rs. cr.) 572.50 Power flow (equivalent of 22877 MU) in MW 2612MW Long term Open Access Charges in terms of Rs./MW/Day 6005 rounded to 6000/- OR Rs.250/MWh Short term Open Access Charges in terms of Rs./MW/Day 1500 OR Rs.62.5/MWh RLDCsinitially Rs.62.5 MWH as declared by OERC Rs.80/MWH taken In view of revocation of above & declaration in Rs/MW/day format System Operator Training

LT & ST Transmission charge calculations DTL (F.Y.2010-11) Annual Transmission Service Charges (Rs. crore) 398.24 Average Transmission Capacity Served in MW  2716 ST_Rate 0.25*398.24*10000000/2716/365  1004.3(Rs./MW/Day) ST_RateRs 41.85/MWh System Operator Training

Typical Example for Power Exchange Trades (1) System Operator Training

Typical Example for Power Exchange Trades (2) System Operator Training

Issues in Intra State Open Access System Operator Training

Open Access in Inter-State Transmission : Key Success Factors • Control area demarcation & boundary metering • Robust transmission system • Assessment of Transfer Capability • Balancing mechanism • Methodology for transmission charge sharing • Treatment of transmission losses • Streamlined scheduling and settlement mechanism • Transparency and non-discriminatory implementation • Compliance • Dispute redressal mechanism • Congestion management

Calculation of Cross Subsidy Surcharge The formula uses the weighted average cost of power purchase of top 5 % as a factor and this leads to a negative cross subsidy surcharge in certain cases Allowing consumers to migrate to open access increases the burden of the DISCOM The calculation of the cross subsidy surcharge is being done with reference to the average cost of supply instead of the cost of serving the consumer. As a consequence, there is an under-recovery and the concerned utility is under-compensated. A trajectory for continuous reduction of the cross subsidy surcharge has to be identified and implemented by the States. System Operator Training

Standby Charges • The various provisions of Act and Policies mandate the DISCOM of providing standby to OA customers. • Unfair on behalf of DISCOMs to keep non open access consumers in dark and provide standby without levying reasonable charges for the standby supply arrangements. • As per the latest FOR guidelines, demand charges for standby supply can be charged for 42 days in a year. • However, some of the States raised the issue that standby charges should be payable for the entire 365 days. • Solution ? • Purchase from market • Enter into a PPA System Operator Training

Dilemma in Planning for Procurement • Some States have an ambitious plan of achieve load shedding free power supply in the State by …. • Planned for power procurement by entering in Long term Contracts or through competitive bidding routes. • In case the bulk consumers are allowed to migrate to open access, then, this additional capacity being procured may result in stranded assets. • DISCOMs would be left with burden of fixed charges of Long Term PPAs entered into, to the extent of migrated load resulting in increase in Supply related costs. • Possible Solution • A vibrant market working in the country • In case a particular State becomes surplus, the surplus as and when available can be sold in the market. System Operator Training

Computation of tariff under open access for bulk customer in a state