Assessment of Cost of Service to Agriculture
Consumers
New Delhi
June 17, 2010
Structure of Presentation
Module 1: Introductory
Module 2: Agricultural background of utilities
Module 4: Model for determination of cost of service
Module 5: Conclusions
Module 3: Important Consideration in assessing agriculture CoS
Module 1
Introductory
Key objective of the study
To formulate methodology to determine the cost of service for agricultural consumers and examination of issues related to it taking into account quality of supply, including hours of supply, voltage fluctuations, reliability of supply etc.
Selection of utilities
Utilities selected have significant agricultural load
Approach to the study
Selection of Utilities
Development of Model
Finalization of Model
Andhra Pradesh
Karnataka
Gujarat
UGVCL
PGVCL
APCPDCL
Haryana
BESCOM
APNPDCL
UHBVN
National & International Literature Review
Identification of Data Requirements
Developing an Excel BasedModel
Improvising Model with feedback from FOIR Standing Committee
In consultation with
Standing Committee
Respective SERC
Module 2
Agricultural background of utilities
Power Consumption in Agriculture sector
Data sources of 2007/08
Sources of irrigation in States
Share of power consumption in agriculture
Tube wells forms important source of irrigation in all states which consumes substantial quantum of power supply.
Agriculture sector forms a substantial part of the total
power consumed
30%
48%
24%
57%
36%
50%
0%
10%
20%
30%
40%
50%
60%
APCPDCL APNPDCL BESCOM UGVCL PGVCL UHBVN
36%29%
47%
18%
10%
5%
1%
1%
35%
27%
52%
29%
16%
11%
51%
3%
28%
1%
0%
20%
40%
60%
80%
100%
Andhra Pradesh Karnataka Haryana Gujarat
States
Canals Tanks Tubewells Other wells Other sources
Module 3
Important Consideration in assessing agriculture CoS
Important considerations in assessing Agriculture CoS….i
Agriculture gets supply during odd hours of the day In most cases agriculture category gets supply during odd
hours Few exceptions are there. E.g. UGVCL- Time schedule for supply to
agriculture is announced weekly and is divided into various group which receives 8 hours of power during the day on rotational basis
Administered peak for agriculture Usually agriculture category does not receive round the
clock supply. Supply is regulated and rostered leading to “Administered Peak”
Flexibility in usage hours could further increase class peak and coincident peak
Important considerations in assessing Agriculture CoS….ii
Low growth of agriculture power demand Growth in agriculture consumption lower than other
categories Higher cost of power purchase due to growth of overall
demand need not be allocated to agriculture
Poor quality of power supply to agriculture Often characterised with poor voltage profile and
unreliable supply Tariff design for agriculture consumers should take this
into consideration
Important considerations in assessing Agriculture CoS….iii
Diversity in agriculture power demand over the year Wide variations in demand across seasons &cropping pattern Methodology to determine CoS to reflect the seasonality in
agriculture demand
Estimation of losses incurred in supplying to agriculture category Agriculture category has substantial unmetered consumption Losses are not known appropriately (including the breakup in
terms of technical and commercial component) Proper treatment to losses in methodology for assessing CoS
Module 4
Model for determination of costof service
Model for Determination of CoS
Functionalisation of Costs:
Power Purchase
Transmission
Distribution
Classification of Costs:
Demand
Energy
Customer
Sample Feeder Data
Derivation of Load Curve
Class Load Factor
Estimation of Coincident Peak
Block Approach for assessing energy component of power purchase
Allocation of Costs to agriculture category
Estimation of cost of supply to agriculture consumer category
Estimation of Cross Subsidies
Functionalisation of Costs:
Power Purchase
Transmission
Distribution
Classification of Costs:
Demand
Energy
Customer
Sample Feeder Data
Derivation of Load Curve
Class Load Factor
Estimation of Coincident Factor
Estimation of Coincident Peak
Block Approach for assessing energy component of power purchase
Allocation of Costs to agriculture category
Estimation of cost of supply to agriculture consumer category
Estimation of Cross Subsidies
Information Requirement Utility system load details Power purchase details (base year and relevant year) Energy details of the utility Profit & loss accounts of the utility Balance sheet and its respective schedules of the utility Revenue details of the utility Detailed composition of all costs incurred by the utility Details of technical and commercial losses in agricultural category Voltage level wise classification of cost Load data of the sample feeders
Sources for Data Collection
Secondary sources such as Tariff orders, Profit & Los Accounts, Trial balance, Balance sheet etc.
Discussions with the concerned utilities and State Electricity Regulatory Commission.
Load studies are based on sample survey in consultation with the concerned utilities.
Step 1 - Functionalisation of costs
Process of dividing the total cost of the distribution utilities on basis of the functions performed - power purchase, transmission and distribution
Power Purchase FunctionAll costs related to purchase of power; inclusive of in-house generation cost, power purchase through long term, short term power purchase contracts, trading and unscheduled interface mechanism.
Transmission FunctionAll costs associated with the transfer of power from power plant to boundaries of utility; predominantly fixed costs
Distribution FunctionAll costs associated with the transfer of power from the transmission system through the distribution system to the consumer (end user); inclusive of costs incurred by the utility in activities such as R&M,
A&G, and employees related expenses etc.
Costs breakup between different functions
Source: Annual Report of 2007/08 of respective utilities
Power Purchase costs forms about 75-85% of the total utility cost
Transmission cost forms about 5-10% of the total utility cost
Distribution cost forms about 10-15% of the total utility cost
0%
20%
40%
60%
80%
100%
APCPDCL APNPDCL BESCOM UGVCL PGVCL UHBVN
Power Purchase Transmission Distribution
Step 2 - Classification of costs
Cost
Classification
Explanation
Demand Fixed in nature
Energy Vary with volume of energy consumed
Customer Depend on number of consumer served
Explained in next few slides for one utility- UGVCL
Functions Cost Classification
Power Purchase Demand Related
Energy Related
Transmission Demand Related
Distribution Demand Related
Energy Related
Customer Related
Classification of Power Purchase & TransmissionIllustrative example- UGVCL- 2007/08
Functions Rs Cr Demand Energy
Power Purchase 2700 32.88%(Rs 888 Cr)
67.12%(Rs 1812 Cr)
Transmission 231 100%(Rs 231Cr)
0%
Power Purchase cost is classified into fixed and variable costs in the ratio as stated in the tariff order
Transmission cost being fixed in nature is classified as demand cost
Classification of distribution costsIllustrative example- UGVCLCosts related to Distribution function are first classified voltage wise and thereafter based on the nature of costs based on the discussion with the officials of the utility
DistributionDemand Energy Cus. Demand Energy Cus. Demand Energy Cus. Demand Energy Cus.
R&M 81% 10% 9% 52% 10% 38% 20% 0% 80% 65% 9% 26%Employee Costs 70% 0% 30% 70% 0% 30% 70% 0% 30% 70% 0% 30%A&G expenses 50% 0% 50% 50% 0% 50% 50% 0% 50% 50% 0% 50%Other debits 100% 0% 0% 100% 0% 0% 100% 0% 0% 100% 0% 0%Prior period items 100% 0% 0% 100% 0% 0% 100% 0% 0% 100% 0% 0%Interest on WC 80% 0% 20% 56% 44% 0% 11% 52% 37% 62% 27% 11%Depreciation 80% 0% 20% 80% 0% 20% 72% 0% 28% 79% 0% 21%Interest & Financial Charges 80% 0% 20% 80% 0% 20% 72% 0% 28% 79% 0% 21%Income Tax & RoR 80% 0% 20% 80% 0% 20% 72% 0% 28% 79% 0% 21% Expenses capitalised(Interest and Finance Charges) 80% 0% 20% 80% 0% 20% 72% 0% 28% 79% 0% 21%
Distribution- 11 KV Distribution- LT net work Retail supply Distribution-Total
Classification of distribution costs (in Rs Cr)Illustrative example- UGVCL
Distribution Costs 11KV LT network Retail supply
Demand Energy Customer Demand Energy Customer Demand Energy Customer Demand Energy CustomerRepairs & Maintenance 75.86 39.41 30.03 6.42 31.95 3.94 3.52 15.74 3.00 11.28 1.28 0.00 5.14 48.98 6.94 19.94Employee Costs 187.20 65.56 65.56 56.19 45.89 0.00 19.67 45.89 0.00 19.67 39.33 0.00 16.86 131.11 0.00 56.19Administration & General expense 29.30 5.86 11.72 11.72 2.93 0.00 2.93 5.86 0.00 5.86 5.86 0.00 5.86 14.65 0.00 14.65Depreciation & Related 89.27 48.75 36.15 4.36 38.95 0.00 9.80 28.85 0.00 7.30 3.14 0.00 1.22 70.95 0.00 18.32Interest on WC 28.36 15.49 11.48 1.39 26.78 0.00 6.74 6.39 5.10 0.00 0.15 0.72 0.52 17.64 7.71 3.00Interest & Financial Charges 61.36 33.51 24.85 3.00 26.78 0.00 6.74 19.83 0.00 5.02 2.16 0.00 0.84 48.77 0.00 12.59Other Debits (incl. Bad debts) 1.84 0.00 1.08 0.75 0.00 0.00 0.00 1.08 0.00 0.00 0.75 0.00 0.00 1.84 0.00 0.00Provison of Income Tax 0.99 0.54 0.40 0.05 0.43 0.00 0.11 0.32 0.00 0.08 0.04 0.00 0.01 0.79 0.00 0.20Rate of Retun 0.85 0.46 0.34 0.02 0.37 0.00 0.09 0.27 0.00 0.07 0.02 0.00 0.01 0.67 0.00 0.17SUB-TOTAL 475.04 209.59 181.62 83.91 174.08 3.94 49.59 124.23 8.10 49.28 52.73 0.72 30.46 335.40 14.66 125.08LessExpenses capitalised 50.79 27.74 20.57 2.48 22.16 0.00 5.58 16.41 0.00 4.16 1.79 0.00 0.70 40.37 0.00 10.43Net Prior Period Charges/Credits -6.67 -1.16 -0.76 -4.73 -1.16 0.00 0.00 -0.76 0.00 0.00 0.00 -4.73 0.00 -1.92 -4.75 0.00TOTAL 430.92 183.01 161.81 86.16 153.08 3.94 44.01 108.58 8.10 45.13 50.94 5.45 29.76 296.96 19.41 114.66
Retail supply Distribution TotalDistribution 11KV Distribution LT network
Step 3- Sample Feeder Analysis Identification of sample feeders
Predominantly agriculture load (80%) Representative of the different circle to capture the geographical spread
Identification of sample days for data collection 18 days uniformly spread across the entire year to capture the seasonality
in agricultural demand of the utility. 1 day of utility peak day
Derivation of load curve from the above data
Estimation of Class Load Factor Average Demand/ Peak demand
Estimation of load loss factor Empirical formula by EPRI to estimate energy losses (0.3 *Load Factor +0.7 (Load Factor)^2
Step 4 - Estimation of Coincident FactorCoincident factor is the ratio of agricultural demand at the time of the system peak to the agricultural peak demand
Estimation of CF using average peak•Agriculture category faces administered peak with lack of voluntary consumption, thus usage of single peak gives biased results
•States witness large variation in monthly peak, thus usage of average peak will capture the overall seasonality during the year.
Steps in Calculating Coincident Factor
Ascertain the time and magnitude of system peak for each of the 12 months separately
Establish the corresponding load from the sample feeder data (average if there are more than two readings for the month)
From the above, take a simple average of above 12 monthly readings.
This average divided by the feeder sample peak gives the CF
Illustration- UGVCL Estimation of CF
Prescribed Date*
0100 0200 0300 0400 0500 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700
06.04.2007 6.073 4.452 5.814 5.836 4.607 5.363 4.196 2.620 2.783 1.286 1.286 3.616 2.403 1.070 4.320 4.486 4.48622.04.2007 5.503 5.620 5.586 5.586 4.270 5.929 8.393 4.622 4.324 4.579 4.555 8.370 7.644 6.856 4.217 3.800 4.37302.05.2007 5.892 5.088 5.003 5.716 5.932 5.937 5.718 4.150 4.995 4.545 4.562 4.435 5.903 5.770 5.931 4.545 4.51219.05.2007 3.780 3.652 3.685 3.523 1.243 4.729 2.727 2.530 2.606 4.266 4.218 4.000 5.041 5.288 3.999 4.365 4.12614.06.2007 2.184 2.564 2.760 2.543 3.375 3.979 3.339 3.267 5.327 4.166 3.993 4.354 5.502 5.517 4.732 4.977 4.76115.07.2007 0.561 0.592 0.681 0.900 0.997 1.814 1.953 1.415 1.229 1.341 0.741 0.803 0.842 0.426 0.625 0.828 0.99125.07.2007 1.504 1.529 1.430 1.612 2.460 2.900 3.550 3.084 2.429 2.249 2.300 2.263 3.853 4.070 3.663 3.480 3.40715.08.2007 0.247 0.296 0.328 0.228 0.562 0.827 0.866 0.885 0.685 0.682 0.952 0.872 2.029 2.429 2.194 2.252 2.16904.09.2007 0.370 0.246 0.246 0.599 1.018 1.307 1.994 2.284 2.448 2.375 2.315 2.184 4.760 2.627 2.116 1.445 0.86526.09.2007 0.635 0.803 0.686 0.837 0.650 0.701 1.050 1.575 0.999 1.541 1.308 1.376 1.270 1.328 2.652 2.425 1.89108.10.2007 5.043 4.775 4.856 4.833 4.043 3.366 3.648 2.741 4.156 5.482 5.191 5.192 6.623 7.270 6.529 7.253 4.34318.11.2007 7.033 6.825 6.421 5.134 4.979 5.112 5.079 4.101 3.599 4.210 4.281 5.650 7.307 7.191 7.239 6.732 6.76201.12.2007 7.445 6.278 6.824 6.940 6.105 4.310 4.837 5.239 5.463 5.556 5.456 7.480 8.097 7.408 7.253 7.162 6.59211.12.2007 7.312 6.391 6.538 5.824 5.807 3.868 4.280 4.041 4.747 4.018 5.172 3.450 4.526 5.920 4.673 5.673 4.97325.12.2007 7.401 6.219 6.606 7.100 6.207 2.669 2.071 2.406 4.449 4.383 3.788 3.762 5.078 5.094 4.062 5.361 5.42712.01.2008 6.231 6.064 5.998 6.590 4.356 4.323 2.772 1.650 3.693 3.823 4.598 4.720 6.767 8.830 7.198 6.707 6.52214.01.08 6.818 6.185 5.906 4.703 4.583 5.805 6.419 7.181 5.431 5.699 5.542 7.296 9.095 9.247 7.075 7.014 1.93320.02.2008 6.236 5.886 4.319 4.859 3.902 3.596 3.547 4.962 6.892 6.591 6.403 3.745 7.045 7.240 6.559 6.299 4.15914.03.2008 8.300 8.253 6.920 6.719 8.164 6.874 5.339 5.059 3.247 3.125 3.023 1.890 3.605 1.930 3.463 3.343 1.686
Months Peak Timings
Corresponding
Feeder data
Apr 8:00 AM 3.62
May 6:00 AM 5.33
Jun 7:00 AM 3.34
Jul 8:00 AM 2.25
Aug 8:00 AM 0.89
Sep 9:00 AM 1.72
CF= Agri demand during system peak/ Max peak
= 3.51/9.25
= 37.97%
MonthsPeak
Timings
Corresponding Feeder
data
Oct 12:00 PM 5.19
Nov 9:00 AM 3.60
Dec 11:00 AM 4.81
Jan 5:00 AM 4.47
Feb 2:00 PM 4.98
Mar 12:00 AM 1.93
Average 3.51
Max feeder load = 9.25 MW
Selected Days for sample collection Sample Feeder Data for 24 Hours of a day
Step 5 - Estimation of Coincident Peak
Estimating Non Coincident Peak
When segregated technical and commercial losses available
NCP = (Consumption and commercial losses in MU)/(LF*8.76) +(Technical Loss in MU)/(LLF*8.76)
When losses could not be segregated into technical and commercial losses
NCP = (consumption + total loss)/ (LF*8.76)
Coincident peak is the contribution of the agricultural demand to the system peak demand
Coincident Peak = Non Coincident peak * Coincident Factor)
Illustration- UGVCL- Estimation of CP
Particulars Remarks Calculations
Agricultural Consumption As per annual accounts 5837 MU
Losses attributable to agriculture Estimated to match annual
accounts 1900MU
Energy Input to agri Sum of above two 7737 MU
Load factor (LF) Derived from Sample Feeder Data 41.97%
Coincident Factor (CF) Derived from Sample Feeder Data 37.37%
Non Coincident Peak (NCP) Energy input/ (8.76* LF) 2104 MW
Coincident Peak (CP) NCP * CF 799 MW
Ratio of CP CP/System peak 37.09%
Step 6 - Block approach to asses energy component of power purchase cost
Merit Order Stack for 2007/08
Base Block
Power Purchase for 2005/06
Growth Block
Power purchase over and above the base block
Estimate the per unit variable cost for base
block (X1)
Estimate the per unit variable
cost for growth block (X2)
B
C
D
A
Variable cost for agri: Incremental Input to agri * X2
Variable cost for agri: Base year Input to agri *
X1
Variable cost of power
purchase attributable
to agriculture category
Different consumer categories pose different weights on the incremental power purchase over the
years. Each category should be charged in accordance with their respective share of the
incremental power purchase
Illustrative example
Cost of PP for Agriculture = Variable cost of base block * X MU + Variable cost of growth block * Y MU (incremental increase in agri sales)
0
2 0 0 0
4 0 0 0
6 0 0 0
8 0 0 0
1 0 0 0 0
1 2 0 0 0
1 4 0 0 0
B a s e Y e a r R e le v a n t Y e a rPo
wer
Pu
rch
ase(
Mill
ion
kW
h)
A g r ic u l t u r e O t h e r c a t e g o r ie s
“Base Block”
“Growth Block”
X million kWh
Y million kWh
Step 7 - Allocation of classified costs
Allocation of Demand CostsFor all functions demand cost is allocated on basis of coincident peak demand
Allocation of Energy Costs: For power purchase energy cost component is allocated on the basis of block approach (previous slide)For transmission & distribution function, energy cost component is allocated on the basis of ratio of agricultural consumption to the total consumption of the utility
Allocation of Customer Costs: For three functions, customer related cost is allocated on the basis of the ratio
of number of agricultural consumers to the total consumers of the utility.
Sum total of the different cost (demand, energy and customer related cost) allocated to the agri consumers gives the total cost of supplying power to agricultural consumers as incurred by the particular utility.
Illustration- UGVCL- Allocation of cost
Power Purchase Cost Transmission charges Distribution TotalTotal Cost
Demand Energy Customer Demand Energy Customer Demand Energy Customer
Functionalised &Classified Cost of UGVCL( Rs Cr)
887.63
1811.73
231.50
296.96 19.41 114.66 3361.88
Allocation of Cost to Agricultural Category (Rs Cr)
329.21
1073.93
85.86 110.14 11.55 27.86 1638.55
Per unit Cost toagriconsumers(Rs /Kwh)
0.56 1.84 0.15 0.19 0.02 0.05 2.81
On basis of Coincident
peak
Block approach
In ratio of Agricultural consumer to
total
In ratio of energy sent to Agricultural consumers to total power purchase
Step 7 - Estimation of Cross SubsidiesCross Subsidy to
agricultural consumers = Total Cost of supplying power to agri consumers – revenue from sale of power to agri – Subsidy provided by the government
Particulars Units
Energy Sold to agri MU 5837
Revenue from sale to agriculture Rs Cr 658
Total Cost of Supply to agri Rs Cr 1638
Subsidy from govt Rs Cr 577
Cross Subsidy Rs Cr 404
Illustrative Example- UGVCL
Module 5
Conclusions
Conclusions……i
Move towards the actual cost to serve pricing principle It would introduce transparency in rate designing and hence in
subsidy/ cross subsidy assessment Special attention to be taken in allocating power purchase costs
Power purchase costs form significant share (75-80%) in overall costs (fixed and variable)
Further, fixed costs ranges between 20% to 50% of the total PP cost (depending on vintage/type/technology of plant)
Agriculture CoS to also reflect quality and reliability of supply Reliabity of supply -Agriculture consumers mostly get restricted
supply When consumers pre informed: No discount on cost of supply When consumers not pre informed: Discount on cost of supply
Conclusions……ii
Quality of supply – Often characterised by poor voltage profile Modify the total cost of power purchase on account of agriculture consumers
considering the average voltage deviations beyond permissible limit Aggregating the penalty levied on licensees due to poor quality supply and,
thereby, moderating the power purchase cost
Use of appropriate load curves Need of load research study for assessment of power demand
of consumer class Sample feeders selected to have predominant load of
agricultural consumers Need to capture seasonal diversity in estimation of CF
Agriculture demand varies across year due to different seasons, cropping pattern and rainfall
Conclusions……iii
Capture the diversity in agriculture demand by taking into account sample load data spread across the year
Estimation of CF to be based on average monthly peak Agriculture faces administered peak
Consumption curve for agriculture would be different had they been provided 24hrs access to power
Use of single “peak” for estimating CoS imposes higher burden on this category and does not take into account the effect of seasonality
Need to change the assets/expenditure accounting practices Utilities should maintain the voltage wise inventory of assets
Thank You
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