Development Of A Common Platform For Electricity Trading CERC Public Hearing

1. Development Of A Common Platform For Electricity Trading CERC Public Hearing Presentation By POWERGRID 19-December-2006

2. Introduction • CERC Staff Paper • Well researched and documented • Created Awareness • Building blocks • Physical growth of networks • Interstate & Super grid • UI and ABT • Creation of a market • Streamlined at the inter-state level • STOA • Merging of markets • A priori to market design • UI • STOA

3. Short Term Open Access Experience So Far & Lessons Learnt

4. Growth Of STOA Transactions + 35 % + 406 %

5. Intra & Inter Regional Transactions (Energy MUs)

6. STOA - Participating Utilities

7. No. of Transactions:Advance Vs Day Ahead

8. Approved Volume:Advance Vs Day Ahead (MU)

9. Applied Energy As % Of Approved Energy (NR)

10. % Utilization of Advance Reservation (NR)

11. STOA Utilization In NR: Sep – Nov ‘06(As % of Approved Energy)

12. STOA Utilization In WR: Apr – Oct ‘06(As % of Approved Energy)

13. Load Curve & STOA(NR) (20-10-2006)

14. Load Curve & STOA(WR) (09-11-2006)

15. Market Structure - Generation

16. Market Structure - Load

17. STOA Experiences • An enriching experience • 95% applicants successful in getting approval for STOA • Single Transaction Size • Smallest – 1 MW • Largest – 450 MW • Maximum transfer 2780 MW on a day • Diversity being gainfully utilized

18. STOA Experiences • Advance Reservation • Applications received up to 300% of available corridor • Pro rata allotment • Volumes • No. of transactions in day-ahead approx 4 times that in advance reservations • Energy volume in day-ahead approx 10% of that in advance reservations

19. STOA Experiences • Utilization of booked corridor • About 70% • Put and call options ? • Easy exit - low cost • Corridor availability • Peak hours – Corridor available but low volumes • Off peak hours – Corridor & power available • Costlier (liquid) generation & captives under utilized • Day ahead transactions • Serious players

20. STOA Experiences • UI volumes • Excessive reliance on UI • Need for a cap on UI volume • Exploding size of matrix • Nearly 100 control areas • Implementation of Intra-State ABT • 96 time blocks • Day ahead – schedules & utilization • Frequent revisions • Un-utilized corridors, prospective buyers/sellers available • No show at 1500 hrs • Getting streamlined through intervention of Honble’ Commission

21. STOA Experiences • Assessment of Transfer Capability • Weather dependent load • Monsoon dependent Hydro generation • Firmness of maintenance schedules • UI volumes – high uncertainty • Floating frequency band – line flows affected • Frequent large contingencies • TTC, ATC, FC ATC, FC SATC, TRM, CBM

22. STOA Experiences • Evils of pro-rata • Advance Booking – E-bidding being avoided • Scheduling • Curtailment on congestion • Problems of SEAMS • Multiple regions and states affected • Reconciliation “If the system operator chooses such tools as pro rata curtailment or bilateral curtailment for line loading relief, they will interfere with economic dispatch.” Steven Stoft, Power System Economics (3-4.5)

23. STOA Contracts So Far …. ? • Advance Contracts – • Firm ? • For physical delivery ? • Forwards? • Options • Call ? • Put ? “The day-ahead market is the forward market with the greatest physical implications” Steven Stoft, Power System Economics (3-5)

24. Procurement Options • Long term contracts • Direct • Through traders • Short term open access • Direct • Through traders • UI • Power Exchange - Another option Freedom to choose from the alternatives

25. ELECTRICITY MARKET IMBALANCES CONGESTION MANAGEMENT ANCILLARY SERVICES SCHEDULING & DISPATCH Four Pillars of Market Design Sally Hunt

26. The Way Forward … • Intra state ABT and STOA at state level • Regulatory framework at state level • Harnessing of latent generation • Optimal use of embedded generation • Reduce market dominance • Intra State STOA • Management of imbalances within states

27. The Way Forward … • Strengthening of network (state level) • Indexing of the real time market price (UI Rate) • Rationalization a pre-requisite for efficient market functioning • Robust financial settlement system • Information exchange system • Strong IT infrastructure • Transparency • Resource building

28. The Way Forward … • Market rules that do not compromise with system operator’s responsibilityregarding power quality and reliability. “In the absence of a mature physical system operators fight an endless losing battle” Charles Concordia

29. Power Exchange • Voluntary participation • Double sided auction • Uniform pricing • Normative transmission charges, to start • Normative transmission losses, to start • No bid caps • Robust financial settlement system • Strong IT infrastructure • Resource building • Organizational issues

30. “Bilateral markets provide a private coordinating mechanism; Exchanges provide a public, centrally determined market price.” “All except the real time market are financial markets in the sense that the delivery of power is optional and the seller’s only real obligation is financial” Steven Stoft, Power System Economics

31. Thank You