2. Consultancy by : Power Grid Corporation of India Ltd

3. Scope of Work To address relevant aspects on the following issues for development of roadmap for intra-State ABT : International Practices in Balancing Markets Developing Concepts related to intra-State ABT –Defining Need,Objective and base principles –Developing options for the the Operational and Commercial aspects –Principles for valuation of UI, SLDC Charges, –Mechanism for Reactive Energy Charges Operational Principles –Scheduling Principles & Process –Congestion Management methodology –Listing of information to be made available

4. Commercial Principles –Developing a Commercial Mechanism –Energy Accounting System –UI settlement Mechanism Implementation Plan Organizational Development –Training –Manpower Requirement –Collection & Processing of SEM data Regulatory Issues –Redressal Mechanism ……..Scope of Work

5. International Practices Real Time Spot Market Day Ahead Market covers –Next day hourly forecast of demand –Availability of Generation –Finalisation of Day-Ahead Schedule considering transmission & generation constraints Generators and Buyers submit price offers/bids. Deviations within a predetermined percentage limit –Penalties for deviation beyond prescribed limit Deviations to be paid as per Real Time Spot Market rates

6. No link with Grid Conditions Suitable in systems where frequency has to be maintained close to nominal Suitable for Utilities having adequate Generation to meet the demand Not suitable to Indian Power System considering present power scenario …International Practices- Balancing Market

7. ABT Balancing Market UI mechanism takes care of the deviations in an inherent way Price based on frequency reflecting load generation balance in the grid No negotiations, no bidding. Flexible-anybody can inject or draw. ISO purchases balancing power and despatches Price of balancing power based on bids which reflect notional market conditions Requires Exchanges, complicated procedure and involves cost in setting up of computerised systems

8. Inadvertent exch- anges priced based on frequency & price is known to all Transparent No gaming UI Pool allows frequency variation between 49.0 and 50.5 Hz. Complex mechanism for pricing inadvertent exchanges Not so transparent Gaming is possible Suitable in systems where frequency has to be maintained close to nominal ABT Balancing Market

9. EUROPEAN & SOUTH AFRICAN MODEL GGG DDD T + SO G D G D This model is followed in UK by NGC, in Norway by Statenett, in Sweden by Svenska Kraftnet, in Finland by Fingrid, in Netherland by Tennet, in Denmark by Eltral/Elkrafts and in South Africa by Eskom. NEXT

10. AMERICAN MODEL GGG DDD TT G D G D G D TSO RTORTO This model is followed in USA. Based on their experience, USA is now moving towards TSO model through RTO.

11. ABT Structure… Two Options Option 1 : Two-part tariff Capacity Charges – linked to availability Variable Charges – as per schedule UI Charges – for deviations Option 2 : Single part tariff GENCO to recover its costs through single-part (CC+VC) – linked to schedule. In such a case, merit order suffers. UI Charges – for deviations

12. AVAILABILITY BASED TARIFF (ABT) Spearheaded by POWERGRID Features:  Unique commercial mechanism linked with frequency  Fixed Charges i.e. Capacity charges  As per Plant Availability.  Variable Charges i.e. Energy charges  As per Schedule.  Unscheduled Interchange(UI) i.e. deviations from schedule (Schedule – Actual) Unscheduled Interchange(UI) i.e. deviations from schedule (Schedule – Actual)  Price as per prevailing system frequency Typical Schedule & Drawal

13. Frequency Profile of ER FREQUENCY CURVE 6th June02 6th June03 47.00 48.00 49.00 50.00 51.00 52.00 53.00 000102030405060708091011121314151617181920212223 Time (Hrs.) Frqe (Hz.)

14. Schedule Vs Actual Injection at Dadri (T) Declared Capability ά Capacity Charges Schedule ά Energy Charges Actual Injection U I Frequency NEXT

15. Schedule Vs Actual Drawal by UP Entitlement ά Capacity Charges Schedule ά Energy Charges Actual Drawal Frequency U I

16. UI Rate as specified by CERC Rate of Unscheduled Drawal/Injection Frequency (Hz)Rate (p/u) Above 50.50 50.0150 49.8210 49.0 and below570

17. GEB MPSEB MSEBCSEB Inter-regional ~ ISGS1 ISGS2 ~ ~ ISGS3 ~ ISGS4 Pvt Licensees Discom 2 Discom 3Discom 4 Inter-state ~ ISGS1 ISGS2 ~ ~ SGS3 SGS4 ~ Inter-state STS ISTS Region State

18. ISGS: Inter State Generating Stations SGS: State Generating Stations CTU: Central Transmission Utility STU: State Transmission Utility Inter-State ABT Intra-State ABT Distribution Control Centre – One for each Discom

19. –Allocations to Discoms from shared generating plants -to be notified by State government State generators Central Sector generators IPPs –Criteria to be finalised In percentages, not in MW terms No unallocated power … ABT Structure …

20. –STU’s role in collection and disbursement of transmission charges STU’s charges CTU’s charges … ABT Structure …

21. –GENCO norms of operation Financial Norms – similar to ISGS –Depreciation, Rate of return, O&M Cost, D:E ratio etc. Operational Norms – similar to ISGS –Auxiliary power consumption –Target availability Can be increased progressively in 5 years. Scheme for incentives – based on availability. … ABT Structure …

22. Option – 1 Single Buyer Model –All the generation including that from IPPs to be pooled /purchased by State-owned holding co. & all power sale / purchase from other agencies through that co. Option – 2 Single Buyer Model –All the generation including that from IPPs to be pooled /purchased by State-owned holding co. except sale /purchase from other agencies Market Models

23. Option – 3 Multi Buyer Model –All the generation including that from IPPs to be sold/purchased by DISCOMs directly & all power sale / purchase from other agencies also directly by DISCOMs Option – 4 Multi Buyer Model –All the generation including that IPPs to be sold/purchased by DISCOMs directly except those from other agencies Market Models

24. STATE POWER POOL : Single Buyer Model- Option 1 GEN 1 2 3 IPP 1 IPP 2 DISCOM A DISCOM B DISCOM C External Purchases s STATE GENCO THROUGH TRANSCO SYSTEM STATE-OWNED HOLDING CO /TRADECO TO POOL ALL GENERATION ISGS Allocations DISCOM D Pvt. Iicensee-2 Pvt. Iicensee –1

25. STATE POWER POOL : Single Buyer Model-Option2 GEN 1 2 3 IPP 1 IPP 2 DISCOM A DISCOM B DISCOM C External Purchases s STATE GENCO THROUGH TRANSCO SYSTEM STATE-OWNED HOLDING CO/TRADECO TO POOL ALL GENERATION ISGS Allocations DISCOM D Pvt. Iicensee-2 Pvt. Iicensee –1

26. STATE POWER POOL : Multiple Buyer Model Option3 GEN 1 2 3 IPP 1 IPP 2 TRANSMISSION SYSTEM OF GETCO STATE GENCO DISCOM A DISCOM B DISCOM C DISCOM D Pvt. Licensee-2 Pvt. Licensee-1 External Purchases ISGS Allocations STATE-OWNED TRADECO

27. STATE POWER POOL : Multiple Buyer Model Option 4 GEN 1 2 3 IPP 1 IPP 2 TRANSMISSION SYSTEM OF GETCO STATE GENCO DISCOM A DISCOM B DISCOM C DISCOM D Pvt. Licensee-2 Pvt. Licensee-1 External Purchases ISGS Allocations TRADECO

28. Options for UI UI Rate Curve-Possible Options Same as inter-state UI-Rate Curve Higher inter-state UI-Rate Curve Lower inter-state UI-Rate Curve Differential Rate Curve ( for injection and drawal of UI) Different curves for CPPs and other bulk power licensee –Frequency –UI rate curve Single-slope Curve Multi-slope Curve

29. Scheme for Reactive Energy Charge Proposal 1: Similar to scheme for Regional ISTS Discom pays/receives for VAR drawal/absorption for Var exchanges at inter-utility connection point –Pays for Var drawal when voltage is below 97%. –Receives for VAR return when voltage is below 97% –Receives for VAR drawal when voltages above 103% and –Pays for VAR return when voltages above 103%. –No charges for VAR drawal/return between 97%-103% Charges payable/receivable by IPPs/ State Genco – variation from Regional scheme – so as to incentivse them to inject/absorb for better system operation Pricing at about 10p/kVarh to incentivise installation of HT Capacitors If elaborate metering at actual inter-change point is provided, then this would be suitable.

30. Scheme for Reactive Energy Charge Proposal 2: Hybrid Scheme Payment of Var charges to ISGS as per Regional scheme –Use ABT meters at SGS-Discom tie-points Payment of Var charges by Discoms to Transco as per scheme similar to HT consumers. –Use normal meters at Transco-Discom tie-points If metering is done at notional exchange points, then existing meters at Discom ’ s boundaries would be used and this proposal will be suitable.

31. –All CPPs requiring wheeling would be under ABT/UI mechanism –Net Injection = Injection – (Consumption + Wheeling Losses) Proposal Consider pre-fixed Schedules at both connection points as NIL Measure Actual Injection at Injection-point (time-block wise) Actual Consumption at Consumption-point (time-block wise) Fix Post-facto Schedule at Injection-point = Actual Consumption +Wheeling Losses Calculate UI = Actual Injection at Injection-point - Post facto Schedule at Injection point Proposed Scheme for CPPs

32. MERC Order in petition no 1/2004 of 3.9.04 have stipulated the mandatory purchase from Renewable energy sources. Options: 1.Status quo- Exemption from UI 2.Schedule energy at fixed rate and deviations at UI prices 3.Scheduled Energy at Bid price and deviations at UI prices Commercial Mechanism for Wind Farms

33. To be discontinued and discouraged Else Injection and drawals would be treated at prevailing UI rates Netting of injection and drawals not in terms of enrgy but in rupees terms Payment receivable by the agency for its Injection = 0.9 x  UI charges for injection Payment payable by the agency for its Drawal = 1.1 x  UI charges for drawals 10% will go towards wheeling since no such wheeling charges are being charged. Schedule = 0. Net payment would be the sum of above two charges. Commercial Mechanism for Banking Arrangements

34. Congestion Management … Two broad methods –Cost-Free Method –Not-Cost-free Method Cost-free Method incorporates actions like –Taking out the congested lines if it helps to ease out congestion –Operation of FACTS devices, if available. –These methods are termed as Cost-free only because the marginal costs involved in their usage is negligible. Not-Cost-Free methods include –Rescheduling generation: –Prioritization and curtailment of loads/transactions:

35. Special Energy Meters- Essential Requirement Metering of active energy Metering of reactive energy Recording of Average Frequency Data storage capacity High Accuracy Tamper proof Local downloads through optical port using a hand held unit called DCD (data collection device)

36. AMR System : Through RS485 connection RS 232 port PSTN Modem PSTN RS 485 / RS 232 Conv. 1 1 1 Meter 31 Meter 2 Meter 1 Local Data Collection Remote Data Collection

37. Local data collection through Optical Port – as backup Meter 31 Meter 2 Meter 1 1 1 1 DCD

38. Intra-state ABT – Achieves. Unbundling of Vertically Integrated State Utilities Mechanism to price power based on Demand / Supply Harness surplus generating capacity available in state with CPPs/IPPs Operation of grid on economic principles –Merit Order Despatch Open Access in Intra-state Transmission and Distribution.

39. Intra-state ABT – achieves Generate signals for efficient grid operation at the intra-state level. –Overdrawals at low frequency by different DISCOMs to be priced. – Encourage serving of higher consumer demand –Encourage maximisation of generation during deficit conditions. –Each DISCOM and state generating station to be responsible for its actions – a profit centre

40. …Intra-state ABT – achieves. Introduce UI mechanism at the intra-state level. – UI to be applied on the deviations from the schedules of the DISCOMs/State generators/IPPs/CPPs. – State Utilities to be liable for the States’ liabilities with the regional UI pool account. –To achieve merit order operation.

41. WORK PLAN TIME SCHEDULE Sl. No.Item \ Week  1st2nd3rd4th5th6 th 1Kick off Meeting 2Furnishing of preliminary data by MSEB 3Report Drafting and Submission of draft Report 4.Discussion on Draft Report 5.Preparation of Final Report 6.Submission of Final Report

42. Time Schedule Zero Date : Signing of Agreement : 26.10.2004 Kick-off Meeting: 26.10.2004 MSEB to furnish data by: 1-2 Weeks Discussions/Presentation with State Utilities on various options : in 3 rd Week MSEB to compile and furnish comments of various State utilities to POWERGRID: within 3 days (after presentation) Submission of Draft Report to Secretary of the Committee : in 4 th Week Presentation on Draft Report : in 5 th Week MSEB to compile and furnish comments of various State utilities to POWERGRID : within 3 days (after presentation) Submission of Final Report: in 6 th Week

43. Secretary of the Committee - Nodal Officer on behalf of Committee. Secretary of the Committee to co-ordinate with all other Utilities for common presentation POWERGRID will submit its draft Report and final Report to the Committee..

44. Implementation Plan 1 st Phase Activities –Finalisation of listing of entities –Listing of Metering locations –Finalisation of quantities of SEMs, DCDs/MTEs –Finalisation of technical specifications of SEMs/DCDs –Initiate tendering process for procurement of meters

45. Implementation Plan 2 nd Phase Activities –Finsalisation of Tariff of State Generating Stations as per ABT parameters/norms –Finalisation of Reactive Charge scheme –Finalisation of commercial mechanism for CPPs, Wind farms, Wheeling and banking, Open Access Customers etc. –Determination of Allocations of different Discoms in State Genco/ ISGS/ IPPs.

46. Implementation Plan 3 rd Phase Activities –Supply and commissioning of meters at different locations –Installation of software for data processing –Installation of software for scheduling / energy accounting –Training –Estimate time for implementation – 12 to 18 months

47. Information to be furnished by MSEB Proposed Model for restructuring, if any Relevant MERC Orders Existing/proposed structure of DISCOMs Existing Commercial arrangements among existing utilites, embedded generators. Actual SLDC Expenditure Load Curve of each DISCOM for last 2 years Power Maps

48. Details of –CPPs (Size, surplus capacity,area) –IPPs (Size, surplus capacity,area) –Renewable energy sources details –Bulk Consumers (no. of bulk consumers of size say greater than 25MW and connection voltage level ) Existing wheeling and Banking arrangements Existing Consumer Tariff and Reactive Power Tariff of entities proposed for UI Mechanism ….Information to be furnished by MSEB

49. Comments/suggestions welcome at mah-abt@indiatimes.com

50. … Congestion Management Options for Not-Cost-Free Methods for Maharashtra –Bidding for reservation of transmission capacity –Ranking according to power market bids –UI differential across Congested Path –Pro-rata rationing: –Relative contribution Physical power flow Compute the contribution of each transaction to the congestion, to define its priority. The relative contribution to a transaction is the ratio between the flow induced by the transaction on the congested line and the volume of the transaction. This may be termed as the participation factor.