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Indian Transmission Sector

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    Indian Transmission Sector

    -

    July 2007

    P w C

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    Agenda

    Legislative Framework

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    Section 1

    Sector Overview

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    Indian Power Sector: Overview

    th

    128 GW of installed capacity,150 million consumers

    resources Eastern region and North-eastern

    er cap a consump on s

    kWh against the world average

    of 2429 kWh

    during most of the months in a year

    85% of the villages are

    electrified, 57% households

    have access to electricity

    Target: Power for all by 2012

    Shortage in generation

    -

    PricewaterhouseCoopers

    July 2007

    Slide 4

    .

    - Peak shortage 13.5%

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    Transmission Sector: Overview

    India is demarcated into 5 regions

    - WR-ER-NER-NR connectedthrough synchronous links

    -

    through asynchronous links

    Inter-regional capacity

    - In 2007: 11,500MW

    - In 2012: 37,150MW

    regional transmission system to

    meet the current demands

    PricewaterhouseCoopers

    July 2007

    Slide 5

    Source: PGCIL

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    Transmission Sector: Overview

    Substantial rowth in total -

    transmission line length over lastdecade

    transmission capacity plannedExisting and Proposed - Inter-regional Transmission Capacity

    40000

    Transmission lines (ckm)

    350000300000350000400000

    20000

    25000

    30000

    35000

    onCap

    acity(MW)

    57000

    172000

    50000100000150000200000

    0

    5000

    10000

    15000

    Transmissi

    2002 2005 2007 2010 2012

    27000

    1950

    1970

    1990

    2006

    012

    jected

    )

    220 kV

    HVDC mono-pole 200 200 200 200 200

    HVDC b-t-b 2000 3000 3000 3000 3000

    HVDC bi-pole 0 2000 2500 2500 6500

    400 kV 1000 2400 7800 11400 16400

    765 kV 0 0 1100 2200 9200

    PricewaterhouseCoopers

    July 2007

    Slide 6

    (P

    ro

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    Transmission Sector: Industry Structure

    - PGCIL is designated as CTUby Govt. of India

    - Each State has one STUdesignated by State Govt.

    - Plans and operates National

    Grid / Regional Grids

    - Undertakes the functions of

    - Plans and operates State grid

    in respective state

    - Undertakes the functions of

    Transmission Operator as well

    as System Operator

    - -

    Transmission Operator as well

    as System Operator

    - -

    other inter-state transmission

    licensees

    other intra-state transmission

    licensees

    PricewaterhouseCoopers

    July 2007

    Slide 7

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    Transmission Sector: System operation aspects

    (ABT) introduced at regional level(in 2002)

    - maintaining grid frequency andvoltages within statutory limits

    responsibility and accountability in

    power generation and consumption

    - ,

    - narrowing demand-supply gap

    100%

    =50.5Hz

    disincentives

    ABT has provided robust and 60%

    80%

    TIME

    of deviations by grid users

    Similar mechanism proposed to be 0%

    20%

    r-02

    n-0

    2l-02

    t-02

    c-0

    2

    b-0

    3

    r-03

    n-0

    3

    g-0

    3t-03

    c-0

    3

    r-04

    t-04

    %O

    PricewaterhouseCoopers

    July 2007

    Slide 8

    rep ca e a a e eve A Ju J O De Fe A Ju Au O De A OPre-ABT ABT in WR ABT in WR+ER ABT in

    WR+ER+NER

    Source: RLDC Reports

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    Transmission Sector: Investment requirement

    system to handle 2,00,000MW by2012 from 1,28,000 MW presently

    transmission (XIth plan):- Regional level: USD 17.5 Billion

    Electricity Plan (NEP) for XIth plan

    - Inter-regional capacity to

    PGCIL: USD 10.3 Billion

    PSP*: USD 7.2 Billion

    en ance rom , n

    2007) to 37,150 MW (in 2012)

    - Evacuation projects (UMPPs,

    - State level: USD 32.5 Billion

    No identified ro ects for

    ISGSs, MPPs, IPPs etc.)

    - System strengthening projects

    PSP yet

    Only couple of steps have

    PricewaterhouseCoopers

    July 2007

    Slide 9

    *PSP: Private Sector Participation

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    Transmission Sector: Key issues

    Challen es for STUs to achieve their Possible o tions to achieveinvestment targets:

    Institutional capability

    investment targets:

    - Augment skilled workforce

    - Private sector artici ation JV /

    Capability to arrange funds

    Limited know-how of new

    IPTC)

    Support required from respectiveGovernments:

    technologies (e.g. 765kV AC)

    Right of Way Issues

    Dela in statutor clearances

    - Statutory clearances

    - Providing counter-guarantee todonors against loans

    Limited suppliers for materials andequipment

    - Budgetary support

    - Policies for encouragingequipment manufacturing

    PricewaterhouseCoopers

    July 2007

    Slide 10

    construction

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    Section 3

    Legislative Framework

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    Transmission Sector: Regulatory framework

    -

    CERC approves annualtransmission charges based on

    approach):- O&M expenses

    Currently, Multi Year Tariff (FY04

    to FY09) is in force

    - Depreciation (straight line

    method, up to 90% of cost)

    - Advance A ainst De reciationSTUs

    Respective SERC approves annual

    transmission charges based on

    - Interest on loan capital

    - Return on Equity (14% post tax)

    Terms and Conditions of Tariff Some states have moved to MYT

    (3 years)

    - Interest on working capital

    - Income tax

    PricewaterhouseCoopers

    July 2007

    Slide 12

    u recovery o a arge

    availability (98%) else pro-rata

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    Transmission Sector: Regulatory framework for PSP

    CEA has to re are National Electricity Plan

    Private investor proposes toconstruct a transmission line, not

    with guidelines for encouragingcompetition in development of

    transmission ro ectsbeing a dedicated transmission lineand not included in the Network

    Plan, the required load flow study

    Envisage formation of Empowered

    Committee whose primary role is-be undertaken by the CTU/ STU

    The result of such studiesindicatin either inclusion or

    - To identify projects to be

    developed under PSP

    exclusion of the proposedtransmission line

    The line can then be constructed

    - o nv e s an o se ec adeveloper

    Similar framework is envisaged at

    PricewaterhouseCoopers

    July 2007

    Slide 13

    by CTU/STU or through PSP state level, however the framework

    is not operational

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    Transmission Sector: Business models for PSP in India

    - CTU/STU owns 26% equity- Balance by the Joint Venture

    Company (IPTC) route:- 100% equity owned by private

    entit

    - JVP selected throughcompetitive bidding process

    -

    - IPTC selected throughcompetitive bidding process

    - Exam le: Western Re ion.

    To evacuate power fromTala HEP (Bhutan) andsur lus ower in ER/NER

    System Strengthening Scheme- II (package B&C)

    Reliance selected out of

    Tata: 51%, PGCIL: 49%

    Approved cost: Rs.1,600 Cr.

    eight bidders Cost: Rs. 2,000 Cr. (25%

    lower than the cost-plus

    PricewaterhouseCoopers

    July 2007

    Slide 14

    - -and Koldam HEP evacuation

    tariff)

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    Transmission Sector: Sharing of Transmission Charges

    sharing of transmission charges: To introduce capacity allocation to

    for the new system Transmission charges for the new

    -

    To rationalize transmission charge

    for using inter-regional links

    beneficiaries

    Implementation of distance &

    No pooling of transmission charges

    for the new system

    rec on sens ve oss a oca on a

    National level

    PricewaterhouseCoopers

    July 2007

    Slide 15

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    Section 4

    Power Market Development

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    Transmission Sector: Promoting power trading

    Delicensed generation (excepthydro)

    trading Setting up of a power exchange(s)

    Non-discriminatory open access:

    - Mandatory in transmission

    15% of new generating capacity

    may be sold outside long term PPA

    as per National Electricity Policy-

    distribution

    Electricity trading identified as a

    Merchant Power Plants (MPPs)

    - MPPs compete for consumers

    st nct cense act v ty Development of markets (including

    trading) by CERCs / SERCs

    - Ministry of Coal has identified

    15 coal blocks (3.6 billion

    PricewaterhouseCoopersJuly 2007

    Slide 17

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    Transmission Sector: Current scenario of power trading

    14,188MU (2.2% of totalgeneration availability)

    row n ower ra ng s

    14188

    14000

    16000

    1000-1500MW (0.8-1.2% of

    generation availability)

    11029

    10000

    12000

    gn can grow n ra e vo ume

    in last four years (CAGR ~ 72%)

    Inter-regional trade increased4178

    4000

    6000

    manifold through ER-NR, ER-WR,ER-SR links

    0

    2000

    FY'02 FY'03 FY'04 FY'05 FY'06

    PricewaterhouseCoopersJuly 2007

    Slide 18

    Source: CERC Power exchange paper

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    Transmission Sector: Current scenario of power trading

    Consistent rise ~40% er annum in prices of traded power

    Prices of off-peak power and RTCpower almost same as most of the

    0.1 cent/kWh

    Trader-Trader transactions notallowed

    erma s a ons are opera ng onbase load

    Indian power market needs

    Increase in price of traded power

    500

    600

    700

    hshortage

    100

    200

    300

    400

    Paise/k

    Sl.

    No.

    Category of

    the Trading

    Licence

    Volume of Electricity

    proposed to be traded

    (in kWh)

    No. of

    Traders

    0

    Jan-Mar'04

    Apr-Jun'04

    Jul-Sep'04

    Oct-Dec'04

    Jan-Mar'05

    Apr-Jun'05

    Jul-Sep'05

    Oct-Dec'05

    Jan-Mar'06

    Apr-Jun'06

    Jul-Sep'061 A Upto 100 million 102 B 100 to 200 million 1

    3 C 200 to 500 million 3

    4 D 500 to 700 million 0

    5 E 700 to 1000 million 0

    PricewaterhouseCoopersJuly 2007

    Slide 19Source: CERC Power exchange paper

    Off-peak power

    Round-the-clock (RTC) power

    ove m on

    19

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    Transmission Sector: Promoting energy trading through PX[CERC guidelines for setting up a Power Exchange (PX)]

    Voluntary participation

    De-mutualized form of

    Transparency in operation anddecision-making

    organization

    Reliable, efficient and impartial

    mana ement

    Computerized trading and clearing

    system

    Efficient financial settlement and

    Ring fencing between ownership,

    management and participation

    payment security mechanism

    Effective system for dissemination

    nvestment support rom t einvestors including institutional

    investors

    PricewaterhouseCoopersJuly 2007

    Slide 20

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    Transmission Sector: Promoting energy trading through PX[CERC guidelines for setting up a Power Exchange (PX)]

    Commission to stay away fromgovernance of the Power

    National Power Exchange Day ahead markets

    Scrutiny of rules and bye-laws

    Assignment of transmission

    Congestion management through

    merit order of bids & offers / pro-

    rata allocation

    Apportionment of transmission

    charges

    Deviation in delivery to be settled

    under ABT/UI mechanism

    Uniform market clearin rice

    roce ures or an ngcongestion

    Monitoring of PX for gaming

    PricewaterhouseCoopersJuly 2007

    Slide 21

    Adjudication of dispute between

    PX and Members

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    Transmission Sector: Promoting Merchant Power Plants

    MPP have to seek open accessfrom CTU up to prospective

    block allocation, hence should theybe allowed to bid for long term

    rocurement b distribution

    MPP required to bear the cost of

    dedicated system required for

    interconnection with the nearest

    licensee

    Transmission system requirement

    grid point

    Issues related to MPP

    Whether MPPs can sell art of

    -

    - Transmission charges

    Sale of power

    capacity under long term PPA Can MPP enter into long term

    PPA after settin u the lant as

    - Short term

    - Spot

    PricewaterhouseCoopersJuly 2007

    Slide 22

    MPP?-

    - ToD

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