POWER TRADING OPEN ACCESS CAPTIVE GENERATION BHANU BHUSHAN Director (Operations )

1. POWER TRADING • OPEN ACCESS • CAPTIVE GENERATION BHANU BHUSHAN Director (Operations ) Power Grid Corporation of India Ltd

2. How do you buy or sell a commodity • which can not be seen, counted in numbers, or measured in kg, litres or metres, • which can not be put in a container with a forwarding address, on a particular truck taking a particular route, but flows as per laws of physics, • which can not be stored, and whose availability and cost keep changing widely,

3. which intermingles with all other supplies in an inevitable pool, and can not have an owner’s name tag ? • There is another peculiarity: the buyer has no control over what the seller supplies, and the seller has no control over what the buyer draws from the pool, and the two may not match ! It is crucial to have mechanism for commercial handling of mismatches

5. 1)Power trading has to be notional: buyer to pay • the agreed amount to the supplier for • scheduled quantum of power. • 2) Payment for variations from the schedule • through a common mechanism, e.g. U.I. • TO AVOID DISPUTES

6. TRADER 10MW 10MW @ Rs. 2.20/ u A @ Rs. 2.00/ u B AGREEMENTS B A ACTUAL FLOW 12 MW 8MW GRID

7. TRADER Rs. 2.20/ u for 10 MW Rs. 2.00/ u for 10 MW PAYMENTS B A UI for 2 MW UI for 2 MW UI POOL A/C

8. DEFINITION OF “OPEN ACCESS” IN THE ELECTRICITY ACT, 2003 “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”

9. A MORE GENERAL DEFINITION OF “OPEN ACCESS” “Enabling of non-discriminatory sale/ purchase of electric power/energy between two parties utilizing the system of an in- between (third party), and not blocking it on unreasonable grounds”

10. REAL ISSUES • Freedom to buy/ sell, and access to market • Adequacy of intervening transmission • Transmission/ wheeling charges • Treatment of transmission losses • Energy accounting, scheduling, metering and UI settlement

11. An Example: • Suppose TATA POWER want to sell 100 MW to Discom- A in Andhra Pradesh • Steps: • TPC and Discom-A to agree on terms and conditions of sale • TPC to get the consent of MSEB and “no-objection” of MSERC • Discom-A to get the consent of APTransco and “no- objection” of APSERC

12. MSLDC and APSLDC to ascertain transmission adequacy, and agree to arrange necessary metering, scheduling, energy accounting and UI settlement WRLDC and SRLDC to ascertain transmission adequacy in their regional transmission systems All concerned to have a common understanding about treatment / sharing of transmission losses, and levy of transmission/ wheeling charges for the use of intra-State and inter-State systems

14. WRLDC SRLDC MSEB/ MSLDC APTRANSCO/ APLDC SCHEDULING, METERING, UI SETTLEMENT TATA POWER DISCOM-A AGREEMENT & PAYMENT FOR SCHEDULED QUANTAM

15. TRANSMISSION • IS THE FACILITATOR OF • OPEN ACCESS • TRADING/ MARKET • CAPTIVE GENERATION, • AND NOT A STUMBLING BLOCK

16. THANK YOU

17. Open Access in Transmission

18. Who can seek access • The Act provides that: • Any licensee or generator can seek open access; and • Any consumer can also seek as and when provided by the State Commission on payment of surcharge as may be specified by the state commission. • The Act specifies who can seek open access. • The Act puts no restriction on the type of transactions that can be facilitated.

19. Types of transactions to be facilitated • The consultation paper states to facilitate only certain types of transactions.It excludes Trader-Trader transactions and also transactions involving any generator seeking access for selling at consumer door step. • Once the Act has provided that who can seek open access, why to limit the types of transactions that are to be facilitated. • Whether surcharge will be applicable in case of transactions involving any generator seeking access for selling at consumer door step.

20. Tranmission Pricing • Transmission pricing must include the capital costs and O&M costs incurred in providing the services. • The concept based on congestion rent should not be applied because it gives incentive to transmission provider for having constraints in his system.

21. Need for distance sensitivity in transmission pricing • The existing regional postage stamp type transmission tariff was developed when TEC process of CEA was taking care of optimization of generation & transmission expansion plans. • With TEC process gone, there is urgent need to revise transmission pricing so that it has • Distance sensitivity • Locational sensitivity • Remove pancaking. In the existing regional system, a beneficiary utility which may not be actually using or getting benefited from part of regional system, still has to share the total regional transmission charges. • The above correction are needed not only for open access tariff, but also for basic transmission service charges.

22. Need for distance sensitivity in transmission pricing • Distance sensitivity • Locational sensitivity • Directional sensitivity • Based on pattern of flows as conceived at the time of expansion planning because this would correctly reflect the costs towards sunk capital. • The above correction are needed not only for open access tariff, but also for basic transmission service charges.

23. Resolving Congestion • Congestion should be resolved based on pre-fixed priorities of transactions. Committed Customers: Level-I Open Access – Long-term: Level-II Open Access – Short-term: Level-III Day-long & Part-day: Level-IV • Lower priority level transactions to be affected only after full curtailment of all higher level transaction constraining the corridor. • Proportionate curtailment in same priority level.

24. A matter of concern • Margins in existing transmission are limited. • Open access charges should be seen not only in comparison with current level of TSC but also with reference to incremental investment in transmission system that is needed for new generation capacities. • Open access wheeling charges should encourage economic transactions, but should not discourage TSC based commitments. Else no one would commit for TSC and the process of building the National Grid would suffer.

25. Notional distances • A total solution • for • – Open Access Charges • as well as • – Transmission Service Charges

26. From  To Notional Transmission Distance in 100 kms. States A B C D E F G H I J K L M N JK,Pb,HP A 4 5 5 5 5 5 7 7 10 10 12 12 14 4 Ch,Hy,De B 6 4 6 5 5 5 7 7 10 10 12 12 14 4 Raj C 7 6 4 5 5 5 7 7 10 10 12 12 14 4 7 UP,Utchl D 6 6 4 5 5 7 7 10 10 12 12 14 4 Bihr,Jhar E 12 10 10 7 4 5 6 9 11 11 9 11 14 4 WB,DVC, Sikkim F 14 12 12 9 6 4 6 9 11 11 9 11 14 4 Orrisa G 14 12 12 9 6 5 4 7 9 9 7 9 12 4 H 12 10 10 7 5 5 6 4 7 7 7 8 10 4 MP,Chatt Gujrat I 11 9 9 7 5 5 5 5 4 6 7 9 11 4 Mah,Goa J 11 9 9 7 5 5 5 5 6 4 7 6 8 4 Andhra K 11 9 9 7 5 5 5 5 7 6 4 6 7 4 Karnatak L 11 9 9 7 5 5 5 5 7 6 5 4 6 4 TN,Kerla M 11 9 9 7 5 5 5 5 7 6 5 6 4 4 16 14 14 12 9 7 9 12 14 14 12 14 16 * NER N

27. NER

28. Notional distances • Notional distances have relation to the incremental transmission costs. • When power transfer would take place through displacement, notational distances have been adjusted towards lower side. This way directional sensitivity has been incorporated. • Frequent change in table not required. Revision once in three to four years may be reasonable. • Same table can be used for incremental losses. In most cases it would give reasonably close values.

29. Methodology MTSC = Monthly Transmission Service Charges pooled for the CTU on all-India basis MLDC = Monthly Load Dispatch Charges also pooled on all-India basis i.e. all RLDCs and also NLDC when it comes G_MW_N100km = Gross-MW-Notional distance of TSC based generation capacity = All India total of MW-km of all allocated Central Sector and Multi-beneficiary generation capacity for which CTU system is primarily built. =  Capacity * Notional Transmission distance as per table

30. Methodology continued... • HBRTSC = Hourly Base Rate of Transmission • Service Charges • = MTSC • 30 * 24 * G_MW_N100km • HBRLDC = Hourly Base Rate of Load Dispatch • Charges • = MLDC • 30 * 24 * G_MW_N100km

31. Open Access – Basic Charges • Basic Transmission Charges to CTU = MW * (N100km – 1 ) * HBRTSC *  • Compensatory Transmission Charges to CTU = MW * HBRTSC *  • Supplementary Transmission Charges to STU = MW * HBRTSC *  • Basic Load Dispatch Charges to RLDC = MW * (N100km – 1 ) * HBRLDC *  • Compensatory LD Charges to RLDC = MW * HBRLDC *  • Supplementary LD Charges to SLDC = MW * HBRLDC *  • If generation wheeling through State system is involved then Wheeling Charges to STU = Av. MW wheeled *HBRTSC * Charges for dedicated system would be separate where  is a factor which would vary for different types of open access customers

32. Charges payable by Long-term Commitment Customers • To CTU • MTSC minus amount billed by CTU on Open Access Customers as Basic Transmission Charges • In proportion to MW_N100km of allocated capacity • To RLDC • MTSC minus amount billed by RLDC on Open Access Customers as Basic Transmission Charges • In proportion to MW_N100km of allocated capacity

33. Types of Open Access Customers and their  Customer Type Duration of agreement Capacity Access duration Priority Value of  1. Long-term Nodal: CTU 12 months or more than 12 months in multiple of months. Fixed for entire period of agreement. Level-II 1.2 2. Short-term Nodal: CTU One month or more than one month in multiple of months. Fixed for period of one month but may vary from month to month. Level-III 2.5 3. Day-long Nodal:RLDC One day or more than one day in multiple of days. Fixed for period of one day but may vary from day to day. Level-IV 3.5 4. Part-day Nodal RLDC Four hours or more than four hours in multiple of hours. Fixed for blocks of four hours or more. May vary from block to block but no block to be less than four hours. Level-IV 5.0

34. Reducing when margins are available and extent of Open Access business increases Figures are indicative only

35. P/kwh for different values of  and OA %

36. Indicative Transmission Charges under the various options

37. Grid Emergency • RLDC should be empowered to curtail any transaction irrespective of priority. • Restoration of priority level curtailment as soon as emergency is over. • Regulatory check on RLDC to ensure that off-priority curtailments are not unduly prolonged on pretext of continued emergency. • Full charges irrespective of curtailments during Grid Emergencies. • Reduced charges when curtailments are due to congestion management other than Grid Emergencies.

38. Power flow based transmission pricing • Transmission tariff related to power flow is desired. • The rates should be fixed based on pattern of flows as conceived at the time of expansion planning because this would correctly reflect the costs towards sunk capital. • The rates should be applied on scheduled transactions. • The rates/tariff should not be based on actual power flows because: • The transacting parties have no control over it. • The cost implication of transaction decision will not be known in advance. • The system will be prone to disputes.

39. Resolving Congestion • Congestion should be resolved based on pre-fixed priorities of transactions. • Variable or bid based pricing mechanism may not be a practical method for resolving transaction conflicts. • We disagree with concept of pricing mechanism based on degree of congestion in the transmission system as it gives commercial signals to transmission providers for planning a constrained system.

40. The Contract Path Method (Alternative-I of consultation paper) • Imaginary connectivity not reflecting actual power flow pattern. • Unfavorable to transactions that take place through displacement. • Path connectivity based on segment wise transmission capacity allocation to transactions is quite complex. • Little practical advantage of this complexity because actual power flows may be quite different. • Not towards true open access.

41. Incremental Postage Stamp Method (Alternative-II of consultation paper) • Requires a demarcation which is artificial and so far non-existent. • 100km x 100km is not in line with our field configuration of network. The regional networks, mostly 400kV, the line segments are generally of 300 – 400 km length. • Transaction metering is based on State boundaries and there is no system for the 100km x 100km zones. • Multiple choice of path connectivity in diagonal transactions. • Blind to locational merits of transactions. • Unfavorable to transactions taking place through displacement.

42. Suggested approach National approach • Focus of development has changed from Regional to National. • In transmission, the objective is to develop National Power Grid. • To facilitate development of National Grid, tariff design in transmission should also change from Regional pool to National pool.

43. Suggested approach Zonalconcept based on State boundaries • Introduce distance sensitivity through zonal concept. • Use existing State boundaries in zonal demarcation. • Zone to zone notional transmission distances in multiple of 100km. • Notional transmission distances to have directional sensitivity.

44. Notional distances • Notional distance within the same zone fixed at 400 km. • Maximum distance limited to 1600 km so as to limit maximum transmission charges. This would help in commercial viability of NER hydro projects. • Notional distances have relation to the incremental transmission costs. • When power transfer would take place through displacement, notational distances have been adjusted towards lower side. This way directional sensitivity has been incorporated. • Figures in the table are indicative. These may be fine tuned based on incremental load flow studies. • Could be revised once in five years or so.

45. Grid Emergency • RLDC should be empowered to curtail any transaction irrespective of priority. • Restoration of priority level curtailment as soon as emergency is over. • Regulatory check on RLDC to ensure that off-priority curtailments are not unduly prolonged on pretext of continued emergency.

46. Availability based Open Access Charges • Charges based on MW_N100km as per access agreed. • Full charges irrespective of curtailments during Grid Emergencies. • Reduced charges when curtailments are due to congestion management other than Grid Emergencies.

47. Need for simple scheme • Scheme based on line-wise transmission capacity allocation requiring declaration of TTC and ATC etc. as suggested in consultation paper may not be practical. • Simpler methods should be evolved and adopted.

48. Nodal Agency • RLDC can be nodal agency for Day-long and Part-day Open Access customers. • However, for Long-term and Short-term customers seeking access for yearly or monthly basis, CTU should be nodal agency.

49. Para 5.14, 5.15, 5.16 & 5.17 of consultation paper • We are not convinced of practicability of the scheme based on dynamic declaration of prices by transmission service provider and customers replacing each others through higher price or duration bids in which there is also scope of hoarding of transmission capacities. • These complexities seems to be unnecessary and have potential for completely jeopardizing the purpose of open access.

50. Apportionment of transmission losses • Assessment of incremental energy losses is an important step in optimum generation dispatch. • Open access customers cause incremental transactions and therefore should bear incremental losses. • Due to current square dependence of losses, incremental losses in percent are double of average losses. • Loss apportionment should be based on product of (a) MW (b) Notional distance and (c) incremental loss factor ; • In consultation paper is it proposed to be based only on MW, to which we differ.