1. Flexibility in Utilization of Domestic Coal Pankaj Batra Member(Planning) CENTRAL ELECTRICITY AUTHORITY August, 2017 1

2. Introduction  The Cabinet on 04.05.2016 approved the proposal for flexibility in utilization of domestic coal amongst power generating stations to reduce the cost of power generation.  Allow use of coal in a flexible manner amongst power plants of Central Generating Stations, State Generating Stations, Power Plants of other State Power Utilities and Independent Power Producers (IPPs). 2

3. Introduction  Central Electricity Authority in consultation with all the stakeholders, prepared the methodology for flexibility in utilization of domestic coal.  The methodology was issued by CEA on 8 th June, 2016.  Subsequently, methodology for use of domestic coal in IPP issued in Feb,2017 3

4. Methodology - Basic Principles  All the long term coal linkages of the States / Centre generating stations (CGS) to be assigned to respective States/Company owning Central generating stations (CGS), instead of individual generating stations.  The Annual Contracted Quantity (ACQ) of each individual coal linkages, as per Fuel Supply Agreement (FSA), to be aggregated as consolidated ACQ for each State and company owning CGS instead of individual generating stations.  The FSA of IPPs would not be clubbed. 4

5. Methodology - Basic Principles  There will be one energy charge rate of the power station based on coal received from all sources including the coal transferred by the other State /Central Generating company.  The requisition for transfer/supply of coal to the coal companies and for transportation of coal to Ministry of Railways would be given at least one month in advance from the agreed date of commencement of supply of electricity.  The Coal companies will give their consent / response within 15 days from the receipt of requisition, else it will be deemed to be approved. 5

6. Methodology - Basic Principles  Ministry of Railways would convey their approval or otherwise within 15 days from the date of receipt of request.  In case of any constraint, an alternative plan would be made in consultation with the Ministry of Railways.  To enable utilities identify Stations for transfer of coal, information related to normative fixed & variable charges for the previous month, margin available for additional generation, etc. to be available on Web portal ( Coal Mitra) 6

7. Methodology - Basic Principles  The equivalent quantum of power to be supplied against the quality and quantity of coal received will be agreed to by the concerned parties.  Reconciliation of the quantity of coal transferred and the equivalent quantum of power received, would be done as per the mutually agreed terms and conditions preferably on quarterly basis. 7

8. Methodology - Basic Principles  The Coal transferring State shall make payment to Coal companies and the Gencos, receiving Coal, shall reimburse the payment made for coal to the State after adjusting any freight/demurrage charges paid to Indian Railways.  The transfer of coal between a State and a Genco will be implemented, as per mutually agreed terms and conditions, to reduce the cost of power generation.  The Agreement will be for a minimum duration of one month and can be extended further as mutually agreed.  There will be no pre-mature termination of this arrangement. 8

9. Methodology - Basic Principles  An inter-ministerial sub-group consisting of representatives from Ministry of Power, Ministry of Coal, Ministry of Railways, CEA and POSOCO would be constituted to look into various operational issues arising during implementation of this scheme.  The sub-group would meet at least quarterly and the methodology will be reviewed periodically for amendments, if any, based on the experience gained during the process.  Any disputes arising out of this arrangement shall be referred to Chairperson, CEA for a decision. 9

10. Methodology - Basic Principles Utilization of Coal amongst generating stations of the State/Central Generating Companies  Central/ State generating companies may utilize coal in its own generating stations in an optimal manner by considering operational efficiency of the generating stations, fixed and variable charges including transportation cost, relative merit order dispatch of power etc.  However, the availability of coal to each generating station corresponding to its normative requirement to be ensured. 10

11. Methodology  Coal would be used optimally in the more cost efficient generating stations of the State Power Utilities.  The objective would be to reduce the variable charges including transportation cost while ensuring adequate availability of coal to all the generating stations. Case 1: Flexibility of utilization of Coal aggregated with the State in its own State Generating Stations 11

12. Methodology  State would be allowed to transfer their coal to the more cost efficient generating stations of other State power utilities.  The landed cost of power received from other State power utilities should be cheaper than the variable charge for generation of electricity from the existing options of using the coal in their own State power stations.  Techno-commercial feasibility would be worked out beforehand subject to transmission system availability. Such an arrangement should be finalized at least 3 months in advance. Case 2: Flexibility of utilization of Coal aggregated with the one State in Generating Stations of other state’s utilities 12

13. Methodology  Any State utility having surplus/unused coal can transfer their coal for use in cost effective CGS, having margin for additional generation and sufficient coal is not available.  The Central Gencos, having margin for additional generation in any of their CGSs and shortage of coal, may also approach original beneficiaries (first priority) for supply of coal.  If the original beneficiaries are unable to supply coal, other willing state may be approached, with the consent of original beneficiaries. Continued... Case 3: Flexibility of utilization of Coal aggregated with the State in Central Generating Stations and vice-versa 13

14. Methodology  The landed cost of power generated at the CGS should be cheaper than that generated at the State utility generating station.  The equivalent quantum of power generated corresponding to the quality and quantity of coal will be deemed to be reallocated from the CGS to the concerned beneficiary. The allocation of power to the original beneficiaries will be reallocated to that extent as consented to for that time period.  The State, supplying the coal, will have to schedule the power generated from the coal as well as obligated to pay tariff as also other charges as per regulations. Continued… Case 3 continued…. 14

15. Methodology  Techno-commercial feasibility would be worked out beforehand subject to transmission system availability. Such an arrangement should be finalized at least 3 months in advance.  The already approved Short Term Open Access (STOA) transactions will not be curtailed.  The generating company will intimate CEA who in-turn will intimate will intimate RLDCs/ RPC about such arrangement as and when finalized for accounting purposes. Case 3 continued… 15

16. Methodology  The States can transfer domestic coal to IPPs and take equivalent power.  State to specify the ceiling tariff which shall be the variable cost of State generating station whose power is to be replaced.  The landed cost (fixed charges, variable charges and transmission charges) at the periphery of the State should be less than the ceiling tariff. Case 4: Flexibility of utilization of Coal by any State/ Central Gencos in Private Generating Stations (IPPs) 16

17. Methodology  State to specify the quantum of power, coal details and the period (min of 1 month to max of 1 year).  Quantum of power procured and Tariff discovered to be within the approved ARR/Tariff Orders by the appropriate commission and considered as deemed approved by the said Commission.  Selection of IPP through e-Reverse bidding process.  Ministry of Railways to be consulted regarding feasibility of the rail transportation Case 4: Flexibility of utilization of Coal by any State/ Central Gencos in Private Generating Stations (IPPs) 17

18. Methodology  Central generating company to have flexibility to use their coal optimally in their more efficient plant including their Joint Venture companies and subsidiary companies within the limits of overall ACQ assigned to them.  The Central Gencos will approach other Central Gencos for supply of additional coal if there is margin for additional generation and shortage of coal.  The consent of the original beneficiaries will always be taken.  The Central Generating Company would ensure that there is savings in coal transportation cost and reduction in energy charge of electricity generated on account of diversion of coal.  The transmission constraint, if any, will be taken into consideration. However, already approved STOA transactions will not be curtailed. Case 5: Flexibility of utilization of Coal assigned to the Central Gencos in their own plants or any other more efficient plants 18

19. Status  All State/Central Gencos signed supplementary agreement for aggregation of Coal with CIL/Coal subsidiaries  NTPC,DVC and several state GENCOs have started using Flexibility scheme by diverting their coal to more efficient power plants  MAHAGENCO and GESCL have floated tenders to buy power by transferring their coal to IPPs.

20. 20 COAL Consumption ( Million Tonnes) in 2016-17 - 574 Domestic Coal ( MT ) – 508 Imported Coal ( MT) - 66 Estimated Requirement (MT) 2017-18 – 630 Domestic ( MT ) – 584 Imported ( MT ) - 46 Estimated Requirement (MT) in 2021-22 - 707 Estimated Requirement (MT) in 2026-27 - 874 Salient Data

21.  Third Party Sampling :  Sampling of coal has been started at both loading and unloading-end.  CCO has downgraded 20 mines/sidings and upgraded 1 mine during 2016-17.  NTPC variable charges reduced by 8.89 paise (16- 17) and 8.72 paise in April-May,17.  DVC -variable charges reduced by about 11 paise

22. % Growth in Coal dispatch to power sector: August 16 to August 17 - 11.9% Apr’16-Sept’16(upto 12 th ) to Apr’17- Sept’17(upto 12 th ) - 6.2%

23. Generation Growth August (1 to 30)Cumulative (1 April - 30 Aug) 2016 2017Growth20162017Growth COAL63637.4 74706.2617.4366223.06386778.795.6 LIGNITE2598.04 2606.590.314272.9213915.09-2.5 GAS4246.95 3900.28-8.220807.7520454.3-1.7 DIESEL8.76 8.19-6.5122.2879.26-35.2 NAPTHA0.08 4.936062.521.2753.7152.5 Total Thermal70491.2 81226.2515.2401447.28421281.144.9 Nuclear3401.72 2185.38-35.815742.5914272-9.3 Hydro17198.9 15042.22-12.563081.0166730.375.8 BHUTAN1048.26 1019.05-2.83032.423026.61-0.2 Total92140 99472.98.0483303.3505310.124.6

24. Generation Growth September (1 to 11)Cumulative (1 April - 11 Sept) 20162017Growth20162017Growth COAL25950.2328070.928.2394347.54417360.085.8 LIGNITE971.981025.435.515317.115027.92-1.9 GAS1717.081501.91-12.522691.0622074.33-2.7 DIESEL2.97 0.0134.794.94-29.5 NAPTHA0.010.00-100.021.2853.7152.3 Total Thermal28642.2730601.236.8432511.68454610.975.1 Nuclear1146.231020.06-11.017019.7215393.68-9.6 Hydro5726.575413.87-5.569375.7472667.294.7 BHUTAN228.99373.3963.13399.333396.57-0.1 Total35854.0637408.554.3522306.47546068.514.5

25. Thank You 25