Regulatory Compliance Issues for Nashik Training Session

8/6/2019 Regulatory Compliance Issues for Nashik Training Session

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PRESENTATION BYREGULATORY & COMMERCIAL

DEPARTMENT

HARANE A.ASUPDTG. ENGR.

REGULATORY CELL


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Edisons Dream

We will make Electricity socheap that only the rich will

burn candles

- Thomas Alva Edison

(1847 - 1931)

2


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Power Scenario . . . 3


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Mahagecos business

Mahagencos Generation Business regulated by

CERC (Central Electricity Regulatory Commission)

MERC (Mahrashtra Electricity Regulatory Commission)

CEA (Central Electricity Authority)

MoP (Ministry of Power)

Appellate Tribunal for Electricity

Supreme Court


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LEGAL

STATUS OF

MERC


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All proceedings before MERC are

deemed judicial proceedings within the

meaning of IPC sections 193 & 228

MERC is a deemed civil court for the

purposes of sections 345 & 346 of the

Code of Criminal Procedure, 1973. (95).

LEGAL STATUS OF MERC. . . 1


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MERC has the same powers as are vested in a civilcourt under the Code of Civil Procedure, 1908 for --

Summoning any person and examining him on oath;

Discovery and production of any document producible as

evidence

Receiving evidence on affidavits;

Requisitioning of any public record;

The examination of witnesses; Reviewing its decisions, directions and orders (94. (1))

LEGAL STATUS OF MERC . . . 2


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MERC has the powers to pass interim order inany proceeding, hearing or matter before it. (94(2))

MERC may authorize any person, to represent

the interest of the consumers in the proceedings

before it. (94(3))

LEGAL STATUS OF MERC . . . 3

Prayas, Pune

Thane Belapur Industries Association, Thane

Mumbai Grahak Panchayat, mumbai

Vidarbha Industries Association Nagpur


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FUNCTIONS

OF MERC


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Approval of Power purchase agreement between a Generating

Company and a Licensee

FUNCTIONS OF MERC . . . 1

safeguarding of consumers' interest & ensures recovery of the cost of electricity in a

reasonable manner

Intra-State transmission of electricity;

Rates of transmission charges,

Wheeling of electricity;

Retail sale of electricity:

Surcharge for wheeling in accordance with the Distribution Open

Access Regulations; 10

To determinetariff


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FUNCTIONS OF MERC. . . 2

MERC shall ask the generating company to furnish separate details

for determination of tariff. (62. (1) ,(2),(5))

MERC may ask the generating company to comply with specified

procedures for calculating the expected Aggregate Revenues from the

tariff permitted to recover.

An application for determination of tariff shall be made by a

generating company or licensee accompanied by appropriate fee.

Every applicant shall publish the application, in form and manner, as

specified by MERC.(64. (1), (2))


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FUNCTIONS OF MERC. . . 3

Declare different regulations with respect to determination of tariff

Formulate State grid Code

Formulate scheduling and despatch code

Formulate norms for performance parameters

Formulate norms for depreciation, O&M expenses

Monitoring the performance vis--vis the norms


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FUNCTIONS OF MERC . . . 4

Maintain Transparency in process

Public hearings for most important matters

Form State Advisory Committee.

Issue Consultative papers on key Issues.

Issue Orders spelling out the policies of the

Commission.


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Data submission

Data regarding Aggregate Revenue Requirement (ARR) and

Annual Performance Review (APR)

Accounts data and Technical Performance data

FY 07- 08 FY 09 - 10

True up APR ARR

FY08 - 09

EstimatesEstimateActualsActuals


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Data submission

Technical & accounting Data required for tariff determination is

to be furnished to MERC as per --

MERC (Uniform Recording, Maintenance and Reporting of

Information) Regulation 2009 (URMRI) (20th April 2009)

Submission on quarterly basis in specified formats

Information based on actuals

Basis of allocation in case of common items

Transparency

Credibility to the Utilities


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Data submission .. .. URMRI

Generation companies in Maharashtra

Maharashtra State Power Generation Company Ltd (MSPGCL),

The Tata Power Company Limited (TPC)

Reliance Infrastructure Limited (RIL) Transmission companies

Maharashtra State Electricity Transmission Company Ltd (MSETCL)


Reliance Infrastructure Limited (RIL) Distribution companies

Maharashtra State Electricity Distribution Company Ltd (MSEDCL),


Reliance Infrastructure Limited (RIL)

Brihan Mumbai Electric Supply & Transport Undertaking (BEST).


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Few entities manage regulated businesses viz. generation,

transmission, distribution, etc as well as non-regulated businesses out

of the purview of the Commission. Few entities operate in Maharashtra and also other states which fall

outside the jurisdiction of the Commission.

Few companies have integrated bundled electricity business within

the State.

These companies maintain their annual books of accounts as

per respective Acts like

Companies Act, 1956,

Electricity (Supply) Annual Accounts Rules (ESSAR),

1985

National Municipal Accounts Manual.


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Formats to be filled up

Format 1 : Balance Sheet

Format 2 : Accumulated Depreciation

Format 3 : Current Assets

Format 4 : Loans

Format 5 : Current Liabilities

Format 6 : Profit and Loss Statement

Format :Cost of Fuel

Format 7 :Cost of Power Purchase


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Format 8.1: Administrative and General Expenses Format 8.2 :Repair and Maintenance Expenses

Format 8.3 :Employee Expenses

Format 9: Long Term Interest Charges

Format 10: Interest on working capital

Format 11 :Income Tax

Format 12 :Return on Equity

Format :Cash Flow Format :Capex Format

Format :Operational Parameter Format- Generation


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Data submission

Regulatory Information Management System (RIMS)

Online uploading of data on monthly basis in specified

formats

Information based on actuals

Basis of allocation in case of common items

Accounting data and technical performance data


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Fixing of norms for performance parameters

Technical Performance parameters

Station Heat Rate,

Auxiliary consumption,

Secondary oil consumption :

Coal Transit loss :

Availability :

2ml/kWh

80%

0.8%


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Fixing of norms for performance parameters

Financial Performance parameters

Depreciation & advance against depreciation

O & M Expenses

Interest on long term loan capital

Interest on working capital

Return on equity :

Sharing of profit or loss

14%


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SCHEDULING


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Scheduling

Scheduling is the procedure used to formulate the order

in which generating units are to be loaded for the following

day in accordance with certain methodology

Scheduling is carried out based on economic dispatch

principles and satisfying various constraints


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The State Load Dispatch Centre (SLDC) shall be responsible for optimum

scheduling and dispatch of electricity within a State, in accordance with the

contracts entered into with the licensees or the generating companies

operating in that State.

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REGULATORY ASPECT

Section 32 (2) of EA 03 statesthat --

The State Grid Code (Part E) provides for a Scheduling and Dispatch

Code to be prepared by MSLDC.

The State Grid Code further specifies that the provisions of the

Scheduling & Dispatch Code shall be consistent with the Scheduling and

Dispatch Code under IEGC specified by CERC under clause (h) of

Section 79 of the Act


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PROCESS OF SCHEDULING AND DISPATCH

The scheduling period comprises of 96 time blocks of a day, each of 15-

minute duration, starting from 00:00 hours ending with 24:00 hours.

All Generating Stations (with unit size > 50 MW) to furnish their forecasted

unit-wise availability schedule to MSLDC on day-ahead basis for every 15-

minute block.

The Generation Schedules of all generating stations in the state and drawal

schedules of Distribution Licensees/Discoms shall be prepared by MSLDC

on 15 minute block basis.

In case the day ahead schedule is not received by 10 AM the schedule

assigned for the previous day shall be the schedule for next day.


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TIMELINE OF SCHEDULING

By 10 AM each day, InSGS shall furnish to MSLDC, their availabilityschedule in MW and MU on day ahead basis taking into consideration any

outage of its generating unit for the next day, in 15 minute blocks

By 2 PM MSLDC shall receive the revised demand forecast from

licensees and revised availability forecast from generators.

By 3 PM MSLDC shall intimate the generation schedule to InSGS.

By 6 PM, the MSLDC shall finalise target dispatch schedules forgenerators and target drawal schedules for licensees.

At 11 PM, MSLDC shall release final generation schedules to InSGS

and drawal schedule to each Distribution Licensees/ Discom.


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RESCHEDULING

Revision of final generation and dispatch schedule issued by MSLDC

may be necessitated on account of --

Reduction of Generation from ISGS or InSGS due to tripping of

units or caused by loss of auxiliaries or due to re-start restrictions of

a Thermal unit following a grid disturbance.

Constraints in interstate / intrastate Transmission System

Hydro station constraints

Movement of system frequency outside the band of 49 Hz to 50

Hz

Scheduling is day ahead, whereas rescheduling is same day


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RESCHEDULING

In case offorced outage of an InSGS, MSLDC will revise the schedules

on the basis of revised generation schedule of the InSGS.

The revised schedule will become effective from the 4th time block after

the time block in which the revision is advised by the InSGS.

During the 1st , 2nd and 3rd time blocks of such an event, the scheduled

generation of the InSGS shall be deemed to have been revised to be

equal to actual generation.

In case ofany grid disturbance, the scheduled generation of all thegenerating stations shall be deemed to have been revised to be equal to

theiractual generation for all the time blocks affected by the grid

disturbance.


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RESCHEDULING.

If, at any point of time, MSLDC observes that there is need forrevision

of the schedules forbetter system operation, it may do so on its own, and

in such cases, the revised schedules shall become effective from the 4th

time block, after the time block in which the revised schedule is issued by

the MSLDC.

MSLDC shall permit the revision of generation schedule by InSGS for

the remaining period of the day/block with advance notice of6 time

blocks. Revised generation schedules in such cases shall becomeeffective from the 6th time block after the time block in which the request

for revision has been received by MSLDC.


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As per MERC order(Case No. 77 of 2006) for approval ofSLDC Budgetfor FY 2007-08 SLDC is entitled to levy Rescheduling Charges on

generating companies, distribution licensees, trading companies,

transmission OA users, as the case may be, at the rate of Rs 3000/-

1. for each revision in schedule after finalization of schedules by

MSLDC on day-ahead basis,

2. for non submission of schedule as per State Grid Code

requirements.

RESCHEDULING CHARGES


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RESCHEDULING CHARGES: Issues

As per CERC terms and conditions of tariff Reg. 24(2):

(i) Any generation up to 105% of the declared capacity in any time block

of 15 minutes and averaging up to 101% of the average declared

capacity over a day shall not be construed as gaming..

(ii) For any generation beyond the prescribed limits, the Regional LoadDespatch Centre shall investigate so as to ensure that there is no

gaming.

If gaming is found by the Regional Load Despatch Centre, the

corresponding UI charges due to the generating station on account of

such extra generation shall be reduced to zero and the amount shall be

adjusted in UI account of beneficiaries in the ratio of their capacity share

in the generating station.


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The practical experience only can be used to resolve theseissues.

Variation in coal quality is one of the reasons for

rescheduling.

Generally, coal quality of a particular mine is fairly constant

& known to our operating engineers. If source of coal is

intimated to operating staff, decision about loading the unit

can be taken accordingly. This practice is being used

successfully at NTPC for rescheduling.



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Improvement in Communication between

CHP personnel who knows the source of

coal rake,

person who is bunkering the coal and

the shift in charge of the unit which is being

fed

will certainly help in rescheduling.



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As per MERC tariff regulation 40,

Declared capacity to be demonstrated as and when required by theSLDC.

Penalty for every mis-declaration for any duration/block in a day isreduction in Fixed cost.

Where the declared capacity is lower side than actual generation, thenany UI charges shall be reduced to zero. 40.3

The operating log books of the generating station shall be available forreview by the Commission

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Mis-declaration Penalty

First 2 days Fixed charges

Second 4 days Fixed charges

Subsequent In Geometrical Progression

Rescheduling


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Station heat rate

Coal firedmachines

200/210/250 MW 500 MW & above

DURINGSTABILISATION

AFTERSTABILISATION

DURINGSTABILISATION

AFTERSTABILISATION

MotorDriven BFP

2600kCal/kWh

2500kCal/kWh

2510kCal/kWh

2410kCal/kWh

TurboDriven BFP

- - 2550kCal/kWh

2450kCal/kWh

Open /Combinedcycle gas

turbines

Advanced classmachines

E/EA/EC/E2 classmachines

Open cycle Combined

cycle

Open cycle Combined

cycle

Large size 2685

kCal/kWh

1850

kCal/kWh

2830

kCal/kWh

1950

kCal/kWh


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Norms of Auxiliary consumption

Coal-based generating stations With cooling

tower

Without

cooling

tower

200 MW series 9.0% 8.5%

500 MW series Steam driven

boiler feed pumps

7.5% 7.0%

Electrically drivenboiler feed pumps

9.0% 8.5%

Gas Turbine/

Combined Cyclegenerating stations

Combined cycle Open cycle

3.0% 1.0%

31.1.2


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Straight line method 90% depreciation till end of life

of asset

Advance against depreciation = (actual amount

payable allowable depreciation )

limited to 1/10 of Principle amount of loan

allowable depreciation

Norms for Depreciation


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DEPRECIATION

Life span of the asset

Annualpremium

of loan

Advance against

depreciationInitialvalueof theasset

Residualvalue of

asset

Repaymentperiod of loan

Annualdepreciation


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Norms for O & M Expenses

Existing generating stations34.6.1

Average of the actual O&M expenses for the five (5) years ending March

31, 2004 shall be considered as O&M expenses for FY 2002 and

escalated at 4 % to arrive at O&M expenses for the base year

commencing April 1, 2005 & further escalated at 4 % per annum

New generating stations34.6.2

200/210/250 MW sets : Rs. 10.82 lakh/MW

500 MW and above sets : Rs. 9.73 lakh/MW

Weighted average for stations with combination of 200/210/250 MW sets

and 500 MW & above set


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Working capital:

cost fuel for 2 months corresponding to target availability.

O&M expenses for 1 month

Maintenance spares @ 1% of historical cost

Receivables towards sale of electricity (fixed cost + energy

cost) for 2 months

Minus fuel cost for 1 month corresponding to target

availability.

Interest on working capital @ Prime Lending Rate of SBI

Norms for Interest on working capital

Sharing of profit / loss on account of controllable /


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Sharing of profit / loss on account of controllable /uncontrollable factors

Uncontrollable factors

Force Majeure Events

Changes in Law, Judicial pronouncements and ordersof Central Govt., StateGovt. or Commission

Economy-wide influences such as unforeseen

changes in inflation rate, market interest rate, taxes and

statutory levies.

Sharing of profit / loss on account of controllable /


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Sharing of profit / loss on account of controllable /uncontrollable factors

(Reg.18,19) GAIN LOSS

Due toControllable

factors

Due toUncontrollable

factors

Due toControllable

factors

Due toUncontrollable

factors

MAHAGENCO 2/3 0 2/3 0

Consumer 1/3 1 1/3 1


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Working Approach Effective submissionIn view of the need of the hour to work under regulatoryregime, Regulatory Cell was formed in FY 2005 afterformation of Mahagenco.Later on it was envisaged that since the regulatory activitiesare more related to the revenue to the company , it will be

more useful if the billing related work is also carried by thesame dept.So in 2010, in order to enhance a commercial approach in

companys working , Commercial activities were added tothe portfolio of Regulatory Dept.

A brief history of RCD


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Co-ordination for Data collection from power stations

Data compilation and preparation of petition with proper

justification for further submission to MERC

Promptly fulfilling the data gaps.

Capex & DPRs submission to commission & follow up for In

principle approval.

Justifying the need of the of the scheme and co-ordination

with the stations for Cost Benefit Analysis and related

submission for the capex scheme.

Pre-submission activities


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Hearing at MERC

Meeting with Regulatory Experts of MERC to resolve the

issues

Public Hearing for tariff determination

Analysis of orders received from MERC

Post-submission activities


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Analysis of Orders received from MERC and according to

decide on way ahead( to file Review before MERC or Appeal

at Appellate Tribunal (APTEL) New Delhi or alternatives

available)

Hearing at APTEL

Matters in supreme court if any.Providing guidelines/suggestions to stations/ concerned

authorities as per the MERC/APTEL orders

Post MERC order activities


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Power purchase agreement for the generating stations.

Raising monthly bills to MSEDCL on 1st of every month.

Calculations for FAC (Fuel Adjustment Change) for every

station & submit up to 22nd of every month .

Other billing related activities like reconciliation, co-

ordination with stations for documentation regarding billing.


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Discuss various important issues in different forums like

Backing down, FAC calculation, merit order dispatch.

Keeping in touch with other generating utilities performance

& regulatory matters.

Study of emerging energy trading market scenario and

prepare our self ready for the future.


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E l f t d t filli


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In the ARR formats in Excel there is inter-linking for many cells.

Also at many locations it is expected that the figures should be reached

through the formulas for the concerned cell.

While giving the order ,MERC people follow the inter-links and formulas

only.

If some figures are directly punched this may create problems when MERC

finalises the order.

This is especially important for truing up year data.

Excel format data filling


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In case of Uran , during FY 08-09 true up, the total fuel quantity and cost

in Form 2.1 was directly punched.

The fuel rates in Form 2.1 and 2.2 were given in $/MMBTU as per

contract.There were some purchases at spot price but this was not considered in

Form 2.2 information.

Resultantly the rates were less than actual .

MERC people simply took the quantity and rate as per format to

arrive at true up fuel cost and ultimately we lost Rs.90 Crs. on true up

( which we regained through APTEL but it took six months)

Example

Ti l it li ti f C dit


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The timely capitalisation of the CAPEX investment is essential.

Generally such works are carried out in the O/H or shutdown and

technical people declare that the scheme is implemented as we

complete the actual installation/commissioning work during the

O/H or shutdown.

But the work completion certification and its cognizance by

Accounts people is much delayed.

This results in delay in capitalization, increase in

IDC,unnecessary comments from MERC for our delays in

implementation.

Timely capitalization of Capex expenditure


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Reform Agenda


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Reform Agenda

Indian Power SystemOpen access in T&D

Parallel Licensing

Cross Subsidy Reduction

History of Indian Power SystemHistory of Indian Power System


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History of Indian Power SystemHistory of Indian Power System

18th Nov.1897 first generating station in India (Asia) commissioned at

Sidrapong (Darjeeling) .

Installed capacity on 15th Aug 1947: 1362 MW.

Electricity: Prime mover for economic

development, Industrial & Green Revolution.

Installed capacity :1,67,077 MW (30/11/2010)

AI Energy & Peak Load Shortages: 11.1% & 11.9%

Per capita: 734 U/year (FY 08) Target: 1000 U (Mar 12)

Indian Power Sector


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Indian Power Sector

Total No. of consumers: Over 130 million.

Revenue: Rs 350,000 CR/year

T&D losses: 18 to 62% in various states.

35% of Indians do not have access to Electricity.

Use: Industries: 42%, Domestic: 25%, AG: 24%, RLY: 3% As on 31/10/10: 5,08,992 villages electrified ( 85.7%)

1,68,33,575 Nos (85.2%) of AG pumps energized

India is 6th Largest electricity utilizing country next to USA, China,Japan, UK & France. By 2014 we will be fourth

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Indian Power SystemIndian Power System Challenges in Transition StageChallenges in Transition Stage

To Reduce Distribution Losses.

Reduce Shortage of power by

effective Load Management .

Promote and Develop Competition

Promote DSM/EE activities.

Promote RE Generation

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Highlights of Indian Gen Sector


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Highlights of Indian Gen Sector

Coal/ Gas/ Diesel: 108,362 MW : (64.9%)

Nuclear: 4,560 MW : ( 2.7%) Hydro: 37367 : (22.4%)

RES : 16,799 : (10.0%)

Total: 1,67,077 MW (MU: 8,30,757 in FY 2010-11)

AI PLF: 2009-10: 77.48%

Coal: 2009-10: 341 MT

Growth: 31/03/85: 42,584 31/03/97: 85,795 MW

31/03/2007: 132,329 MW 31/11/2010: 167,077 MW

Renewable Generation


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Renewable Generation

RE Source: Wind/ Solar/ Bio-Gas/ Small Hydro (Mini, Micro Run Of RiverProjects)/ Baggase/ Bio mass: Infirm sources

Issues in RE Sources:

Site Selection/

Grid Connectivity / Storage

Non Schedulable resource/

Low Plant load factor Satara, Maharashtra

AI Transmission Network


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AI Transmission Network

400 KV Lines: 102,166 Km, 220 KV Lines: 196,355 KM

400KV S/S: 124,676 MVA 220KV: 196,355 KM 765KV Lines: 3910 KM & S/S: 4500 MVA

EHV: 765 KV/ 400KV/ 220 KV/ 132 KV/ 110 KV /(+/-) 500 KV HVDC

In 11th Plan JV/Private Sector Transmission projects (1200KV/765 /400/220KV) are being developed

During 2009-10, 765KV Seoni-Bina S/s line & second circuit of Bina-Gwailor have been commissioned.

Evolution of National Grid


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Evolution of National Grid

State grids ( 1948+)

Regional Grids (1970+) National Grid (2003+)

What are the advantages of Interconnections?

Higher Moment of Inertia (Stable system)

Higher Power Number Mumbai (60MW/HZ) /Maharashtra (400MW/HZ)/ Western

Region (800 MW/HZ)/ India (2100 MW/HZ)

Regional Grids of August 2006


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Regional Grids ofIndia

Merging of markets alongwith synchronization ofregions

NEW Grid

SouthGrid

South

West

North

East

Northeast

FiveRegional GridsFive Frequencies

October 1991East and Northeast

synchronized

March 2003

West synchronizedWith East & Northeast

gNorth synchronized

With Central Grid

Central Grid

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harashtra Load Curve and Demand Manageme


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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

BASE LOAD

BASE LOAD

MW

Base Load Managed through Long Term PPAs

Daily Variations Managed through

1) Day ahead Power Exchange or 2) UI Balancing

Seasonal Variations Managed through Short Term trades, by

1) Traders, 2) Bilateral Contracts or 3) Banking Arrangements

14

12

10

8

6

4

Hours

66

Mumbai Load curve as on 10/05/2010


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Functions of Distribution Utilities


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To Give

Good quality supply / services

Continuous Supply

At an Affordable Cost

Issues

We cannot store electricity in bulk

Control switches with consumers

Payment Afterwards

Main issues with Distribution System


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Main issues with Distribution System

Distribution Losses: Technical ( I Square R) & Non-Technical (Commercial) losses(Theft, faulty/ Slow meters)

Solution to Theft: Areal Bunched Conductors (ABC)/ High Voltage DistributionSystems (HVDS)

High Distribution Transformer failure rate (13.4%)

Consumer Metering:Automated Meter Reading (AMR) system

Time of Day (TOD)/ Time of Use (TOU) metering

Challenge: Demand Side Management (DSM)/ Energy Conservation

Aggregate Revenue Requirement


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Aggregate Revenue Requirement

Sr.No.

Paerticulars ApprovedARR (Rs Cr)

% of totalARR

1 Power Purchase 24213 76.3%

2 Employee Expenses 2591 8.2%

3 A&G and R&M 772 2.4%

4 Depreciation 458 1.4%

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InterestOther Exp

640661

2.0%2.1%

7 Transmission charges 1879 5.91

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Total expensesROE

31214533

98.3%1.7%

9 Total ARR 31747 100.0%

10 Non-Tariff Income 1450

11 ARR from Tariff 30297

Tariff Setting


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TariffSetting

Consider a Utility purchasing 8000 MUs from Genco

(Rs 1.50 P.U.) & 2000 MUs from Traders(Rs 4.0 P.U.)

P.P. Cost = 8000 * 1.5 + 2000 * 4

= 1200 + 800= Rs. 2000 Cr. for 10,000 MU

i.e. P.U. input cost = Rs 2 / Unit

Consider the Utility has Fixed Expenditure = Rs. 800 Cr.

i.e. Total Input Cost = Rs. 2800 Cr. for10000 MU input

(i.e. Per unit Cost = Rs 2.80)

Tariff Setting


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If Distribution loss is 30% ,One unit of Input means, 0.7 Unit Sold.

i.e. Rs 2.80 have to be recovered from 0.7 Unit sale

i.e. P.U. Sale Cost = 2.8 / 0.7 = Rs 4 P.U. at consumer end

If the losses are 20%, i.e. 0.8 P.U. sold per unit Input

i.e. P.U. Sale Cost = 2.8 / 0.8 = Rs 3.50

If Losses are 40%, i.e. 0.6 unit sold per unit Input

P.U Sale Cost = 2.8 / 0.6 = Rs 4.58

Distribution loss is Integral Component of Retail TariffDistribution loss is Integral Component of Retail Tariff

TariffSetting...

What is Success?


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What is Success?

In 1988 Tendulkarfailed inEnglish in 10th

standard

Now, in 2011 for10th Standard English

bookthe first lesson is

about

Open Access, Parallel Licensee


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Open Access, Parallel Licensee

Electricity Act 2003M d t f R f


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Mandate for Reform

Promoting competition/ Protecting consumers interest /

Providing power to All Consolidation of Laws in G/T/D/ Trading

Gen is decentralized but Regulatory freedom needed foraccessing the market

Transmission: Licensed activity. Regulatory framework

necessary for competitive & transparent operation

Buying/Selling commoditynamed Electricity


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named Electricity..

Which cannot be seen, counted in numbers, or measured

in Kilos, liters or meters Which cannot be put into container with forwarding

address, on a particular truck taking a particular route,but flows as per laws of Physics

Which cannot be stored and whose availability and cost

keep changing widely

Buying /Selling of Electricity.


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uy g /Se g o ec c y

Which intermingles with other supplies in an inevitable

pool & cannot have an owners name tag Buyer has no control over what seller supplies &seller

has no control over what buyer draws from the pool &the two may not match all time

Thus, it is necessary to have mechanism for commercial

handling of mismatches

Solution ????


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Solution ????

Power trading has to be notional : the buyer has to pay

the agreed amount to the supplier for scheduledquantum of power

Payment for variations from the schedule through acommon mechanism called UI (Unscheduled

Interchange)

C t f U h d l d


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Drawl from CS 2500MW

Gen 10000 MW

State Load12500 MW

CS Schedule 2000MW

CS UI 500MW

If System frequency is 49.5 Hz, the State has to pay ar Rs 8.73 PU isRs.10,18,250 in 15 minutes! (500 MW: Rs. 1.018M)

Cost of 12000 MW scheduled generation for 15Min at Rs 3 PU is

Rs. 12000/4 X 3 i.e. 90,00,000 in 15 minutes! (12000 MW: Rs.9.0 M)

(For only 4% Energy: Price is over 10% : Avoid overdrawing)

Concept of UnscheduledInterchange

79

UI rate in Paisa


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80

Electricity Markets


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y

More private sector participation needed Need to unbundle supply system & start multi-seller,

multi-buyer model

Basic need: consensus building in various stakeholders

Competition: Open access (using existing DLs wires & paying wheeling charges)

Parallel Licensing (New DL to lay the network & give supply)

We should see competition as an opportunity & not as a threat

Open Access


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Open Access

OA means that customer can pick & choose their supplier & any supplier can useexisting lines to reach any customer.

On payment of wheeling charges, CS surcharge & additional surcharge whereverapplicable. (S 42(2), 42 (4))

Open access means enabling Sale/ purchase of energy between two parties utilizing thesystem of an (in-between) third party & not blocking it on any unreasonable grounds.

Implications: Competitors may cherry pick high revenue customers but Cross Subsidy &Stand by issues

More clear definition


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Open access means enabling non-

discriminatory Sale/ purchase of electrical energybetween two parties

utilizing the system of an (in-between) third party

& not blocking it on any unreasonable grounds

Example of OA


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Tata Power wants to sell 100 MW to Discom A in Andhra

TPC & Discom A agree on terms & conditions of sale TPC to get consent from MSETCL /STU & no objection

from SLDC Kalwa

Discom A to get consent from APTRANSCO and APSTUand no objection from AP SLDC

Example (contd)


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Both SLDCs after ascertaining transmission adequacy

agree to arrange for necessary metering, scheduling,EA, UI settlement

All concerned to have a common understanding abouttreatment/ sharing of transmission losses, levy oftransmission/ wheeling charges for use of intra-state &

inter-state system

OA REGULATIONS OF MERC


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MERC has formulated two Regulations: Transmission OA2005 & Distribution OA , 2005

Distribution OA Regulations permit consumers with contractdemand >= 1 MVA are eligible to avail OA from by 1st April2007

Draft for OA Regulations were finalized & uploaded onMERC website for comments by stakeholders & consumersup to 11th Feb.2011.Final Version is getting ready

Categorization of OA Customers


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Long term Open Access customers OA for a period >= 12 years but not exceeding 25 years

Medium term Open Access customers OA for a period < 3 years & > 3 months

Short-term Open Access customer OA for a period up to one month, at a time.

Limited Short term OA customer means consumer, who has a supplyagreement with the DL & avails OA only during pre-scheduled LS period

Open Access: issues


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Cross subsidy: To compensate full/partial revenue loss of

existing DL Apportionment of losses

Shortage scenario: load shedding

State of Art Energy metering & EA system

Despite none of these issues, most countries took over tenyears to implement full OA

Charges for Open Access Customer


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Charges payable by OA customers:

Transmission charges & Wheeling charges Cross Subsidy Surcharge (CSS)

Additional Surcharge (ASC)

Standby Support charges (SBSC)

Scheduling & System Operation Charges payable toSLDC

Why Cross Subsidy Surcharge(CSS)?


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In current tariff orders, CSS & ASC are identified as NIL

from 1st

April 2007 (due to negative values) Study Committee re-examined approach

towards CSS & ASC. By identifying a value for CSS & ASC, prospective OA

applicant would share burden of Cross Subsidy.

Cross Subsidy Surcharge NTP formula


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S = T [ C (1+ L / 100) + D ]

S: Surcharge T: Tariff payable by relevant category of consumers; C: Weighted average cost of PP of top 5% at the margin excluding

liquid fuel based Gen. & renewable power D: Wheeling charge L: % System Losses for applicable voltage level

( In case the formula gives negative value of surcharge, C in theformula needs to be redefined (????))

Cross subsidy surcharge


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Surcharge formula (NTP)S = T [C (1+L/100) + D]

C Costliest long term contracted PP cost excluding liquidfuel generation may be considered

Example:If C Rs.4.26 PU (for costliest LTPP) then S =67 PS/Unit for IND consumer @ 33KV & above

OA CSS IN Various States


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State

Punjab

Haryana

Uttrakhand

Himachal Pradesh

Madhya Pradesh

Rajasthan

Cross Subsidiary in Paise/Unit

0

72

38

20

84 at 66/33 KV and 62 at 132 KV

13

Additional Surcharge: Stranded costs


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OA customer, receiving supply from a person other than DL of his areaof supply, shall pay to the DL, an additional surcharge, in addition to

wheeling charges & CSS, to meet out the fixed cost of such DL, arisingout of his obligation to supply as provided under Section 42(4) of EA2003.

Additional surcharge shall become applicable only if, the obligation ofDL in terms of LTPP commitments has been stranded.

Fixed costs related to network assets are recovered through wheelingcharges.

Additional Surcharge (ASC)


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DL should be required to demonstrate stranded cost, ifany, every six months to SERC.

On being satisfied, SERC would determine additionalsurcharge (Ps/KWH)

Such ASC should be levied only on new open accessapplicants.

No ASC for captive GEN plant for carrying electricity to

destination of his own use.


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Unscheduled Interchange


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If an OA consumer is unable to draw scheduled energy dueto failure of InSTS &/or network of DL, power injected maybe treated as Banked Power& OA consumer may be allowedto draw the same within a period of 3 months with anadvance notice of 24 hours to DL.

Beyond 3 months, energy would be treated as lapsed.

Metering


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For OA consumer having load of >= 10 MW & allGen Stations irrespective of capacity, Special Energy

Meters shall be installed by STU or DL as the casemay be, for & at the cost of the customer.

SEM can be inspected by any person authorized bySTU/ SLDC.

As regards OA consumers having load < 10 MW, theTOD meter shall be installed by DL concerned.

All OA customers shall follow Metering Standards ofCEA.

States Allowing OA Power Procurement through Power Exchanges


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Punjab

Haryana Uttarakhand

Himachal Pradesh

Madhya Pradesh

Rajasthan

Tamil Nadu

Volume on Power Exchanges


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Price on Power Exchange


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BENEFITS OF OPEN ACCESS


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Maharashtra is facing peak & energy deficits, even after subsequentreforms programs, the utilities are not unable to bridge the gap and

provide quality & reliable power supply to consumers. With OA, consumers are will get alternative sources of power from

Market, may be, at a lower cost, & can have assured availability ofpower on demand

Purchase of costly power to meet demand can be avoided, which willactually result in lower PP cost for DL, leading to lower tariffs for

remaining utility consumers. However, Revenue of DL will get affected (CSS/ASC/SBC)

Parallel Distribution Licensee


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MERC can grant distribution license to more than onepersons for distribution through their own networks insame area (6thproviso of S14)

Implications: DL will face Competition in its HT & HighRevenue Customers.

Determination of tariffSection 62 (1) proviso 1 (d)


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The appropriate Commission may determine tariff inaccordance with provisions of this Act for (a)Generation (b) Transmission (c) Wheeling (d) retailsale of electricity

PROVIDED that, in case of distribution of electricity in

the same area by two or more DL, the Commissionmay, for the purpose of promoting competition,among DLs, fix only maximum ceiling of tariff forretail sale of electricity.

Competition through parallel licensee


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SERC to grant License if investment meets GoIstipulated norms (S 14/Proviso 6)

Tariff ceiling may be set by Regulator(S 62(1d))

No time frame issue unlike OA: Commencement ofoperation by time & cost of roll out plan

Competition in retail through parallel network is an

immediate possibility.

Main Difference


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OA: On incumbent licensees Network

CSS/SB-Charges/ASC to be decided as the network ofincumbent Licensee is used

Parallel Licensee: DL will have to lay the network.

Ceiling Tariff concept.


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Case study: TPC-D and R Infra-D


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Hon. Supreme Court Order dated 8th July 2008 allowing supply ofelectrical energy in retail by TPC-D utilizing distribution network of the

other licensee present in the area.

and allow these three appeals upon holding that under the Terms &Conditions of the licenses held by it Tata Power Co. Ltd. Is entitled toeffect supply of electrical energy in retail directly to consumers, whoseMD is less than 1000 KVA, apart from its entitlement to supply energy

to other licensees for their own purpose, and in bulk, within its area ofsupply as stipulated in its licenses.

TPC Petition dated 30th August 2009


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R-Infras area of supply forms the part of TPCs area ofsupply. Both have common areas to the extent of R-Infras area of supply .

TPC proposes to use R-Infras existing Dist networksystem to ensure smooth Change over.

Public Hearing on TPCs petition 30th Sept 2009 & 8th Oct

2009 (136 persons present)

MERC Order..


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Noting the consumer interest & their keenness to exercise the choiceof supplier on immediate basis, MERC decided to issue interim order.

Order issued on 15th Oct 2009 as per powers vested under Section 94(2)of EA 2003:

The appropriate Commission shall have powers to pass such interimorder in any proceeding, hearing or matter before the Commission, asthat Commission may consider appropriate.

No reference has been drawn to Section 42 of EA 2003 & Regulations

issued there under, to avoid the applicability of Section 86(1)(a).

Some issues about change over


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Period for change over: shall not exceed 30 days fromthe date of receipt of complete change over applicationform by TPC.

Past Dues/liabilities & disconnection: As per Section 56of EA. (Disconnection of supply in default of payment).

Migration is not allowed to consumer who is in arrears,

without clearing his dues or for a disconnectedconsumer (in arrears)

Shifting : Energy Meter Issues


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Shifting : Energy Meter Issues

Ownership of Energy Meters: Consumers have a choice tocontinue with the existing meter of R-Infra/ Opt for meterfrom TPC / Purchase his own meter from third party

Joint testing of meter at the time of migration

Meter for changeover consumers

to have downloadable capability Common meter specifications

for third party meter purchase

Shifting of consumersfrom RIL To TPC


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Meter reading for consumers to be done by TPC . As TPC will beresponsible for Billing/ Collection & meter reading is an

integral part of bill preparation.

TPC will provide meter reading info to R-infra on daily basisalong with the date& time

TPC shall pay R-Infra wheeling charges within 21 days fromdate of bills raised on changeover consumers ,irrespective ofpayment of WC by consumers.

Security Deposit & Theft detection


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Security Deposit: Last month bill will be issued by RIL In case of non-payment ofdues, RIL after deducting the SD available with them can disconnect theconsumer, if the consumer does not pay the balance amount in time

Theft & inspection: Any theft by meter tampering or bypassing meter leads toincreased distribution losses for R-Infra and requires R-Infra to pay for thisenergy, in intra State pool at System Marginal price. To ensure that wheeling DLis able to manage distribution losses, it should have the RIGHT TO INSPECT andREAD Consumer METER from time to time for detection & investigation of theft

by way of meter tampering or bypassing the meter


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Calculation of tariff forChange-over consumers


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Tariff for Change-Over consumers

= Charges based on tariff of supply DL

(-) Wheeling Charges of Supply DL [a](+) Wheeling Charges of wheeling DL [b]

(a) HT = 18 Ps/KWH & LT = 37 Ps/KWH

(b) HT = 46 Ps/KWH & LT = 88 Ps/KWH

Two DL: Supply (Tata), Wheeling: R-infra

About 90,000 Consumers shifted from R-Infra to TPC. Applications received50,000 (+) MIAL Case: Daily savings Rs 10.5 Lakh

Residential (monthly bill in Rs) : Savings :13.5% to 31.2%

Conclusions


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EA 2003: Engineers/Economists/LawyersEngineers: like to operate sophisticated PS

Economists: like to work on optimal incentives

Lawyers: like to write rules & agreement

Power sector reform brings all of them

into close contact. But None of them can

succeed at their chosen tasks, unless they work

together in designing sustainable solutions

for the Customers

Important issues inCross Subsidy Reduction


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Analysis of various MERC tariff orders: No definite pattern forCS is being followed.

CSR plan for each utility, to be prepared, separately.

We are in the process of finalizing the Roadmap &

simultaneously preparing the draft Regulations.

ACOS for various utilities


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MSEDCL: 455 P/UBEST: 575 P/U

TPC-D: 520 P/UR-Infra-D: 635 P/U

Categories having >1% of total Sale AND /OR >1% of total consumers AND >1% Revenue


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Utility ACOS (Ps/Unit) Min ABR (Ps/U)Categories

Max ABR (Ps/U)Category

MSEDCL 455 210(46%) LTV- AG

845 (186%) HT-Com

BEST 575 368 (64%) LT-Res

755 (131%) HT-Com

R-Infra (*) 706 524 (74%) LT- I-Res

952 (135%) LT-II-Com

TPC-D 520 395 (76%) LT-I-Res

551 (106%) HT-Com

Three step in Cross subsidy Reduction


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Step I: Inter category Cross subsidy Reduction based onAverage cost of supply for utility

Step II: Inter category Cross subsidy Reduction based oncost to serve for each category

Step III: Intra category (sub-category wise) cross

subsidy reduction

Tariff Subsidy by GOM(Consumers to pay at a lesser tariff than approved by MERC)


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Financial Year AG Consumers (RsCR)

P/L Consumers(Rs CR)

Total Subsidy (RsCR)

FY 2005-06 1309 333 1642

FY 2006-07 1229 484 1713

FY 2008-09 1305 471 1776

FY 2009-10 1397 485 1882

FY 2010-11 1865 658 2523

Important issues


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Categories having Sale


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ACOS= RS.4.55/KWH Total CS = Rs. 5020 Cr in total ARR of Rs 32056

Cr (15.7%) [64% from IND & 31% from COM]

CATEGORY SALE MU ABR % of ACOS CS=(ABR-ACOS)

CS IN RS.CR

% ofTotal CS

LT-COM 3814 686 151% (*) 231 881 18%

LT IND 4549 537 118% 82 373 7%

HT IND 25024 570 125% (*) 115 2878 57%

HT-COM 1620 845 186% (*) 390 632 13%

RLYS 1427 604 133% (*) 149 212 4%

CS IN MSEDCL (FY 2010-11)Subsidized Categories[71%to AG & 19% Domestic]


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CATEGORY SALE MU ABR % of ACOS CS=(ABR-ACOS)

CS IN RS. CR % CS of TTLCS

LT-Res 12478 379 83% 76 948 19%

LT PWW 591 226 50% (*) 229 135 3%

LT Ag 14057 210 46% (*) 245 3444 69%

HT Ag 496 248 54% (*) 207 102 2%

HT PWW 1190 417 92% 38 45 1%

MPECS 743 296 65% (*) 159 118 2%


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Other SERCs


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AP: No specific road map & just trying CSR. COS approach to be used.CS to be brought into +/-20 % level

Delhi: Does have specific CSR Road map. But decided to use ACOSapproach (No specific mention of intra-class CSR)

Orissa: Tariff Policy being followed for deciding allowable level of CS.There is an intra- Discom CS. No specific mention about the

method/Road map for CSR. (No mention about Intra-Class CSR)

MPERC Notification: 06/10/2010: LT(ABR as % of ACOS of that FY)


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Category FY 08-09 FY 09-10 FY 10-11 FY 11-12

Dom 93 93 94 95

Non-Dom 152 140 130 120

PWW 86 90 92 95

IND 121 121 121 120

AG Met 67 67 73 80

St Light 100 100 100 100

MPERC Notification: 06/10/2010: HT(ABR as % of ACOS of that FY)


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Category FY 08-09 FY 09-10 FY 10-11 FY 11-12

RLY 128 123 123 120

Coal mines 149 140 130 120

PWW 88 90 92 95

IND 125 124 122 120

Non-IND 136 131 126 120

Seasonal 179 160 140 120

Bulk-Res 97 97 97 97

Bulk supply 80 85 90 95

CS Reduction: Rs 341 CR to be reduced per year

(considering ACOS remains constant for 5 years)


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Category PresentABR %

Year 1 Year 2 Year 3 Year 4 Year 5

LT COMABR

CSR in Rs Cr

151%685

145%660

-107

139%632

-107

-132%610

-107

126%573

-107

120%546

-107

HT-INDABRCSR

125%570

124%565

-120

123%560

-120

122%555-12

121%550

-120

120%546

-120

HT-COMABRCSR

186%845

173%786-97

160%727-97

147%668-97

134%609-97

120%545-97

RLYSABR

CSR

133%604

130%590-16

127%576-16

125%568-16

122%554-16

120%545-16

CS : Rs 252 CR to be increased per year

(considering ACOS remains constant for 5 years)


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Category PresentABR %

Year 1 Year 2 Year 3 Year 4 Year 5

LT PWWABR

CSR in Rs Cr

50%226

56%253

16

62%28016

68%30716

74%334

16

80%363

17

LT-AgABRCSR

46%210

49%221217

53%239217

57%257217

61%275217

65%293217

HT-AgABRCSR

54%247

58%265

9

62%284

9

66%302

9

70%321

9

74%339

9

MPECSLABR

CSR

65%295

68%309

10

71%32210

74%33610

77%349

10

80%363

10

Some imp issues.


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LT AG tariff: 46% to 65% in 5 years (CSR in 10 years)

HT AG tariff: 54% to 74% in 5 years (CSR in 7 years)

CSR/ Year: Rs. 340 Cr/year Rise: 252 Cr/year

Balance amount to be increased in categories with ABR>80 &


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CS reduction roadmap being prepared & CSR regulationsbeing prepared

Final draft under preparation

CS Surcharge for each utility will be computed &

computations will be sent to stakeholders for comments.

Reforming the Existing system


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Many of the important thingsin the world have beenaccomplished

by the people,who kept on trying, even when

there seem to beno hope at all

Dale Carnegie


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135

PERFORM OR PERISH

-Visveshwariah


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Thankyou

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Regulatory Compliance Issues for Nashik Training Session

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