AVAILABILITY BASED TARIFF

- Tariff structures - Two part tariff

- Concept of ABT - ABT structure- Expectations from OEMs/Utilities

Session outline

TARIFF STRUCTURES

Tariff StructureFlat Rate- single part (p/kWh) - prior to 1991

All Costs are pass throughCapacity utilisation linkage

@ 55% in 1975

Two part Tariff ( K.P.Rao) - 1991 to 2001 Fixed ChargesVariable Charges

Availability Based Tariff( ABT) - 2001 onwards Capacity charge

Energy chargeUnscheduled interchange

Two part tariffComponents of Fixed Charges

• Return on Equity– ROE - 16% allowed

• Interest on Loan capital• Depreciation

• O&M ExpensesNormative– 2.5 % of the current capital cost

Two part tariffComponents of Fixed Charges

Interest on working capital– Rate of interest is the current cash credit interest charged by the bankers– Working capital Norms

• Two months receivables

• spares for 1- year

• Coal stock- 15days/1 month for pit-head/others

• Oil Stock for 1 month

• Fuel expenses and O& M expenses for 1 month

• Taxes on income

VARIABLE CHARGESVARIABLE CHARGES

• Normative and based on operational performance • The Norms

– Plant Load factor 4500 Hours /kW/year during stabilisation period and

5500 hours/kW/year there after (corresponds to a PLF of 62.78%)

– Sp.Oil Consumption 3.5 ml/ kwh

– Heat Rate 2500kcal/kwh ( 40kcal/kwh reduced for electrically

driven BFPs)

VARIABLE CHARGESVARIABLE CHARGES

– Aux. Power consumption• For 200MW units - 9.5% (additional 0.5% with

cooling towers)• For 500MW units(steam driven BFPs) - 8.0 %

(additional 0.5% with cooling towers)• For 500MW units(elec. driven BFPs) - 9.0 %

(additional 0.5% with cooling towers)

• Variable cost calculated thus would be subject to monthly fuel price adjustment

Tariff Structure - Two Part TariffTariff Structure - Two Part Tariff

Worldly most accepted structure Capacity charge component based upon the

customer capacity utilization. Energy charge to cover the cost of energy

THE GRID CONDITIONS PRIOR TO ABTTHE GRID CONDITIONS PRIOR TO ABTWide frequency variations causing serious damages at

generation & load ends.

Low frequency during peak hours, with frequency going down to 48.0 – 48.5 Hz.

High frequency during off peak hours, with frequency going up to 50.5 to 52.0 Hz.

Rapid changes in frequency – 1 Hz change in 5 to 10 minutes, for many times every day.

Very frequent grid disturbances, causing tripping of generating stations.

WHY THIS GRID INDISPLINE ?WHY THIS GRID INDISPLINE ?

The TWO PART tariff mechanism was not providing any incentive for either backing down the generation during off-peak hours or for reducing the consumer load by the beneficiaries and/or enhancing the generation during peak hours.

In fact, there was financial incentive in continuing with generation at higher level, even when, the load (consumer demand) had come down. This was due to the fact that incentives were linked with actual generation.

AVAILABILITY BASED TARIFF

BACKGROUND• Two Part Tariff had no mechanism to impose

- Grid discipline.

- Market Competition

- Breaking monopoly

• 1994 - M/s ECC engaged by GOI for

rationalisation.

• Formation of NTF and RTF

• M/s ECC report»Market Mechanism»Recommendation for ABT

Frequency Profile (Pre-ABT and Post ABT)

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Freq.: 23-Jun-2002 Freq.: 23-Jun-2003

400 Kv BUS Voltage profile - a Typical Day

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APPLICABILITYAPPLICABILITY

ABT is applicable to:-

All central sector generating stations (whether

inter-state or intra-state) , viz, the power plants

of NTPC, NLC, NHPC, THDC etc.

All the beneficiaries, who draw power from

central sector generating stations, viz, SEBs,

Bulk Consumers having entitlements in CGS.

ABT IMPLEMENTATION STATUS IN INDIAABT IMPLEMENTATION STATUS IN INDIA WR – 01.07.02

NR – 01.07.02

SR – 01.01.03

ER – 01.04.03

NER – 01.11.03

CONCEPT

• Performance criteria shifted from PLF to Availability.

• Introducing the concept of Re-trading

• Introduction of Frequency linked component

• Introduction of Merit order despatch

Availability Tariff

Rational tariff structure for power supply from generating stations on a contracted basis.

The payment of fixed cost to the generating

company is linked to availability of the

plant.

Amount payable to the generating company over a year towards the fixed cost depends on the average availability (MW delivering capability) of the plant over the year.

Hence the name ‘Availability Tariff ’

Primary objectives of ABT a) To encourage maximisation of generation

b) Deviate from the schedules and take advantage of the UI

mechanism.

c) Mandatory FGMO for all generating units.

d) Generators are expected to operate and maintain their

stations with high plant availability in a sustained

manner.

e) Positive deviation through the UI mechanism ensures

extra power for consumers and/or enhanced optimisation /

conservation of resources.

e) Natural Merit order

COMPONENTS OF ABTCOMPONENTS OF ABTAvailability Based Tariff Mechanism has following three components:

Capacity Charge for Sent Out Availability Energy Charge for Scheduled Generation / Drawl Unscheduled Interchange (UI) Charge:

The Variation from generation schedules, i.e., Actual Generation (AG) - Scheduled Generation (SG)

The Variation from drawal schedules, i.e., Actual Drawal (AD) - Scheduled Drawal (SD)

AVAILABILITY BASED TARIFF AVAILABILITY BASED TARIFF

The fixed cost elements relates to Capacity Charges are

Return on equity Interest on loan Depreciation including AAD O&M expenses Interest on working capital FERV on capital cost

VARIABLE COST ELEMENTS

Energy (variable) charges cover the fuel costs and are worked out on the basis of ex-bus energy scheduled to be sent out from the generating station as per the following formula;

Energy Charges (Rs.)=Rate of Energy Charges in Rs/kWh X Scheduled Energy (ex-

bus) in kWh corresponding to scheduled

generation.

The components of energy charges are Primary Fuel Cost, i.e., coal for thermal units. Secondary Fuel Cost , i.e., oil for thermal units.

UI MECHANISM

TOOL FOR INDUCING GRID DISCIPLINE ?

UI TARIFF BEING LINKED WITH FREQUENCY, SENDS

AN APPROPRIATE COMMERCIAL SIGNAL TO

GENERATORS & STATES DEPENDING UPON THE GRID

FREQUENCY ALLOWS THEM TO TAKE CORRECTIVE

ACTION AND BRING THE FREQUENCY NEAR THE

NOMINAL LEVEL.

FEATURESFEATURES OF ABTOF ABT

Capacity Charge and Energy Charge do not depend on PLF of the station and actual generation/drawal respectively.

No complications w.r.t deemed generation.

No year end commercial adjustments.

Perpetual Incentive for maximizing generation and reducing drawal during peak load conditions.

No incentive to over generate during off-peak conditions.

TERMINOLOGYAvailability : in relation to a thermal generating station for any period means the average of the daily average declared capacities (DCs) for all the days during that period expressed as a percentage of the installed capacity of the generating station minus normative auxiliary consumption in MW, and shall be computed in accordance with the following formula:

N

Availability = 10000 x Σ DCi / { N x IC x (100-AUXn) }%

i=1

where,

IC = Installed Capacity of the generating station in MW,

DCi = Average declared capacity for the ith day of the period in MW,

N = Number of days during the period, and

AUXn = Normative Auxiliary Energy Consumption as a percentage of gross generation;

TERMINOLOGY

Declared Capacity (DC): The capability of the generating station to deliver ex-bus electricity in MW declared by such generating station in relation to any period of the day or whole of the day, duly taking into account the availability of fuel

TERMINOLOGYPlant Load Factor(PLF): The total sent out energy corresponding to scheduled generation during the period, expressed as a percentage of sent out energy corresponding to installed capacity in that period and shall be computed in accordance with the following formula:

N

PLF = 10000 x Σ SGi / {N x IC x (100-AUXn) }%

i=1where,

IC = Installed Capacity of the generating station in MW,

SGi = Scheduled Generation in MW for the ith time block of the period,

N = Number of time blocks during the period, and

AUXn = Normative Auxiliary Energy Consumption as a percentage of gross

generation;

TERMINOLOGY

Unscheduled Interchange (UI) Charges:

• Variation between actual generation or actual drawal and scheduled generation or scheduled drawal shall be accounted for through Unscheduled Interchange (UI) Charges.

• UI for a generating station shall be equal to its actual generation minus its scheduled generation.

• UI for a beneficiary shall be equal to its total actual drawal minus its total scheduled drawal.

• UI shall be worked out for each 15 minute time block. Charges for all UI transactions shall be based on average frequency of the time block

• UI rates are frequency dependent and uniform throughout the country.

UI SHALL BE BASED ON THE AVERAGE FREQUENCY OF THE RELEVANT TIME BLOCK.

AVAILABILITY BASED TARIFF - UI

AVAILABILITY BASED TARIFF - UIAVAILABILITY BASED TARIFF - UI if a power plant delivers 1934 MWs, while it was scheduled to

supply only 1800 MW, the energy charge payment would be for 1800 MW only, i.e., for scheduled generation only.

The excess generation, i.e., 134 MW in above example would be paid for at a certain rate known as Unscheduled Interchange (UI) Charge, which would depend upon the system conditions prevailing at that time.

If the grid has surplus power at a particular time and frequency is above 50.5 Hz, the energy rate (for extra power) would be nil. If the system frequency is between 50.5 – 49.8, the rate would be small, i.e., varying from 6 paise per unit to Rs. 2.10 per unit depending upon the system frequency. However, if the system frequency is between 49.8 – 49.0, the rate would be high, i.e., varying from Rs. 2.10 per unit to Rs. 5.70 per unit.

CAPACITY CHARGE

Related to ‘availability’ of the generating station and the percentage capacity allocated to the state.

‘Availability’ for this purpose means the readiness of the generating station to deliver ex-bus output expressed as a percentage of its rated ex-bus output capability.

ENERGY CHARGE

Energy charges shall be worked out on the basis of a paise per kwh rate on ex-bus energy scheduled to be sent out from the generating station as per the following formula

Energy charges = Rate x Scheduled Generation (ex-bus)

CGS-2 CGS-1 CGS-3

BULKCONSUMERS

SEB/SLDC 1 SEB/SLDC 2 SEB/SLDC 3

inter state IPPs

REGIONAL GRID RLDCControls

CONTROL AREA UNDER ABT FOR CONTROL AREA UNDER ABT FOR RLDCRLDC

CENTRAL GENERATION

STATETHERMAL

REGIONALGRID

STATEHYDRO

BULKCONSUMERS

DISCOM 1 DISCOM 2 DISCOM 3

STATE IPPs

CPP

STATE GRID SLDC

CONSUMERS CONSUMERS CONSUMERS

CONTROL AREA UNDER ABT FOR CONTROL AREA UNDER ABT FOR SLDCSLDC

Controls

Scheduling Process

Day ahead

• By 10 AM, RLDC collects the plant-wise ex- Bus MW capability of ISGSs for the next day

• By 11 AM, RLDC advises SEBs, on a 15 minutes blockwise level, their entitled MW shares from each ISGSs’ availability

• By 3 PM, RLDC receives block-wise MW requisition from SLDCs and also the schedule of bilateral exchanges, if any

• By 5 PM, RLDC issues ‘despatch schedules’ for ISGSs and ‘net drawal schedules’ for SEBs, 15 minutes block-wise for the next day starting at midnight.

• Upto 10 PM SLDCs may inform any change of the above or bilateral exchanges to RLDC, if required by any new development during the day.

• At 11 PM Schedules are frozen for the next day. RLDC issues final drawal schedules to each State & Despatch schedule to each ISGS.

REVISIONREVISION OF SCHEDULES / REQUISITIONSOF SCHEDULES / REQUISITIONS

Revision of schedules are permitted due to contingency such as:-

Outage of generating unit.

Revised declaration of availability by CGS.

Outage of a transmission element.

Unforeseen load-crash.

REVISIONREVISION OF SCHEDULES / REQUISITIONSOF SCHEDULES / REQUISITIONS

Revision takes effect from:- 4th Time Block in case of

Forced outage of a generating unit Transmission constraint Grid disturbance Suo Moto revision by RLDC, in the interest of grid stability

6th Time Block in case of Revision of declared availability by CGS Revision by beneficiaries due to unforeseen load-crash

Tripping of 500MW unit

Tripping of 500MW unit

Stopping of 500 MW unit

Stopping of 500 MW unit

SPECIAL ENERGY METERS (SEM)SPECIAL ENERGY METERS (SEM)To implement ABT, Special Energy Meters (SEM) have been provided at

the following locations

At generating stations - main & check meters on the outgoing feeders from the generator

SEM can record:-

Average frequency for each 15 minutes time block.

Average net energy transmitted for each 15 minutes time block.

Cumulative net energy transmitted.

NATURAL MERIT ORDERNATURAL MERIT ORDERNATURAL MERIT ORDERNATURAL MERIT ORDER

Further benefits expected

UI mechanism For the intra-State stations

• State stations would respond to grid conditions • Higher power availability during peak-load hours• Reduced load shedding

How to bridge Demand - supply gap Harnessing the existing captive and co-generation

power into the grid and pay as per the frequency-linked UI rate.

The State would financially gain with respect to regional grid at the prevailing UI rate.

UI is a very versatile mechanism. It can even be applied for non-conventional generation (solar, bio-mass, wind, mini-hydel) to gainfully harness the capacity, which may not come into the grid otherwise.

OPTIMUM UTILIZATION OF

INTRA - STATE RESOURCES

Actual net drawal exceeds the net drawal schedule the State has to pay UI charges.

• This liability can be reduced by restricting the overdrawal, particularly when frequency is below normal.

• This in turn requires maximization of output from all intra-State stations, which means that there is a pressure on each State as well for perpetually enhancing the availability of all intra-State stations

In the absence of Availability Tariff for intra-State stations, these stations have no direct incentive acting on them for maximizing their availability.

IMPROVEMENTS BROUGHT BY ABTIMPROVEMENTS BROUGHT BY ABT

Quantum improvement in system parameters Grid frequency Voltage profile

Innovative methods in system operation Pump operation at

Kadampurai Re-arrangement of electrical

loads Optimal utilization of

reservoirs Condenser mode operation of

Idukki Inter regional trading

Win-win situation for both regions

Opportunistic UI transaction

Expectations from OEM

• High Reliability

• Least equipment down time

• For High Availability of equipments : Maintenance of High Quality Standards while manufacturing , erection & Commissioning

• Adhering to the Free governor mode operation

Expectations from Generators & Grid Operators

• Ensuring Reliable power with high availability specifically during peak hours

• Demand side Management

Thank You