Role of Tariff in Regulation of Indian Power

8/3/2019 Role of Tariff in Regulation of Indian Power

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By

Arun Kumar Singh

Anurag Srivastava

Gajwant Singh

KIET, Ghaziabad


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` The installed capacity of Indian power system on28.02.2009 was 1,47,715.51 MW excluding CPPconnected to Grid.

` the 11th plan capacity addition of 78,700 MW wasprojected which after the announcement ofNuclear Deal revised to 90,000 MW.

` At the end of 12th plan the total installed capacityis expected to reach to 2,00,000 MW.


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` The countrys transmission perspective plan for

eleventh plan focuses on the strengthening of National

Power Grid through addition of over 60,000 ckm of

Transmission Network by 2012. The transmission

network will be able to transmit 60% of the power

generated in the country.

` The existing inter-regional power transfer capacity is

17,000 MW, which is to be further enhanced to 37,000MW by 2012 through creation of Transmission Super

Highways .


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0

2

4

6

8

10

12

14

16

18

0 2 4 6 8 10 12 14

%EnergyShortage

Months

2004-05

2005-06

2006-07

2007-08


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0

2

4

6

8

10

12

14

16

18

20

0 1 2 3 4 5 6 7 8 9 10 11 12 13

%peakshortage

Months

Peak Shortage

2004-05

2005-06

2006-07

2007-08


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` Cost of electricity from different generations, such

as hydro, nuclear and thermal differ, depending

upon the regional resources and government

policies.

` The exploitable energy resources in our country

are unevenly distributed, like Coal resources are

abundant in Bihar/Jharkhand, Orissa, WestBengal and Hydro Resources are mainly

concentrated in Northern and North-Eastern

Regions


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NR

WR

SR

ER

NER

Ennore

Kudankulam

Kayamkulam

Partabpur

Talcher/Ib Valley

Vindhyachal

Korba

LEGEND

Coal

Hydro

Lignite

Coastal

Nuclear

Vizag

Simhadri

Kaiga

Tarapur

Mangalore

Krishnapatnam

RAPP

SIKKIM

MYANM

MAR

CHICKENNECK

Cuddalore

SRI LANKACOLOMBO

NEPALBHUTAN

DESHBANGLA

South Madras

Pipavav

Generation Load-Centre

Kolkata

Bhubaneswar

Patna

Lucknow

Delhi

Mumbai

Chennai

Bangalore

Bhopal

Guwahati

Jammu

Ludhiana

Jaipur

Gandhinagar

Indore

Raipur

Thiruvananthapuram

Kozhikode

Hyderabad


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y At the time of independence, the total generation capacity installed inthe country was 1362 MW.

y GOI created SEBs under I E (supply) Act 1948.

y

Indian Power System was originally grown as vertically integratedsystem.

y The Generation, Transmission and Distribution systems were bundledtogether.

y This was first initiated by Chile in 1982 continued to improve and

adopted by major countries of the world.

y It proved to be the optimum solution in the changed conditionsworldwide


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` To Encourage installation and generation GOI

issued a policy of private participation in 1991.

` Electricity Regulatory commission Act, 1998.

` ABT along with the Electricity Act of 2003 is the

most important step taken in the Indian Power

System.


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16441

22526 23134

30000

0

5000

10000

15000

20000

25000

30000

35000

2004-05 2005-06 2006-07 2007-08

EnergyinMU

Year

Energy traded at Inter State level


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778

3938

5787

9560

0

2000

4000

6000

8000

10000

12000

2004-05 2005-06 2006-07 2007-08

No's

Year

Transaction at Inter State level


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` In electrical paradigm tariff refers to the rate atwhich different types of consumers are required topay for being facilitated with electrical services

` Generation, transmission and distribution of theelectrical energy involve a huge amount of moneythus, tariff and rules for recovery of appropriateamount of return for provided service plays a very

important role in the life, health and growth of theorganization.


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` The criteria for deciding the tariff of end users is

quite different from the tariff of the power plants for

supplying power to utilities.

` The end user tariff is decided by socio-techno-

economic principles whereas the power plant tariff

is purely a matter of techno-economics


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y Low frequency during the peak load hours , with frequency going down to

48-48.5 Hz for many hours every day

y High frequency during the off peak hours, with frequency going up to 50.5

to 51 Hz for many hours everyday

y

Rapid and wide changes of frequencies everydayy Very frequent grid disturbances , causing tripping of generating stations,

interruption of supply to large block of consumers, and disintegration of the

regional grids

y Least cost power not dispatch in preference of more costly power

y

Integrated grid operations require the normalization of frequency across allfive Regions requiring proactive load management by beneficiaries and

dispatch discipline by generator


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y Capacity charge: This component represents fixed cost, payable togenerating station, which comprises of interest on loan, return on equity,depreciation, insurance, taxes and interest on working capital.

y The payment of fixed cost to the generating company is linked toavailability of the plant, that is, its capability to deliver MWs on a day-by-

day basis.

y In the Availability Tariff mechanism, the fixed and variable costcomponents are treated separately.

y In case the average actually achieved over the year is higher than the

specified norm for plant availability, the generating company gets ahigher payment. In case the average availability achieved is lower, thepayment is also lower. Hence the name is Availability Based Tariff.


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` Energy Charges: this component represents variable cost,which comprises of the fuel cost, i.e., coal and oil in case ofthermal plants and nuclear fuel in case of nuclear plants ofthe power plant for generating energy as per the given

schedule for the day.

` Energy charge is not based on actual generation and plantoutput, but on scheduled generation.

` Unscheduled Interchange Charge: This charge is payablefor the deviation from the schedule depending upon the systemcondition.


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` Enhanced grid discipline ensuring quality power

supply for all consumers.

` Promote competition, efficiency and power

trading.

` Introduce and encourage merit order dispatch inIndian power system.


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48.6

48.8

49

49.2

49.4

49.6

49.8

50

50.2

0 1 2 3 4 5 6 7 8 9 10 11 12 13

Frequency(Hz)

Months

Frequency profile

2004-05

2005-06

2006-07

2007-08


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74

53

72 1 0 0

3 40 0 0 0 0

0

10

20

30

40

50

60

70

80

2000-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

No's

Year

Grid Disturbances

minor major


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405

410

415

420

425

430

435

440

445

0 2 4 6 8 10 12 14

MaxVoltage(KV)

Months

Max Voltage profile at important grid point

2004-05

2005-06

2006-07

2007-08


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350

360

370

380

390

400

410

0 2 4 6 8 10 12 14

MinVoltage(KV)

Months

Min Voltage profile at important grid points

2004-05

2005-06

2006-07

2007-08


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52.4

53.2

56.5

55

56.5

53.9

55.3

57.1

61

60

63

64.4

64.7

64.6

67.3

69

69.9

72.2

72.7

74.8

74.3

76.8

48

53

58

63

68

73

78

PLF

Year

OverallPLFofThermalPowerStat

ion


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-2000

-1500

-1000

-500

0

500

UICharge

sinRsLakh

s

weeks

NTPC UI Trends

2003-

042004-052005-062006-

072007-082008-09


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-3000

-2000

-1000

0

1000

2000

3000

4000

UIChar

gesinRsLakh

s

weeks

KARNATKA UI TrendS

2005-062006-072007-

08


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` The ABT must be extended to state and retail level upto the level of feasibility.

` Time-differentiated tariff can further encourage the

stack holders to participate in the systemmanagement.

` The real time pricing may have locational features inaddition to the system condition.

` Subsidy should be reduced in phased manner andfinally be eliminated within the target period.


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y Cross-subsidization should not be done from othertype of the consumers within the system; rather itshould be done from the other areas in consultation

with the ministry that deals the matters of socialwelfare.

y More encouragement should be given to privateinvestors.

y Open market to be developed for better power trading.


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y Tariff amendments after the Electricity Act 03 have played amajor role to bring discipline and responsibility in the IndianPower System.

y The UI mechanism provides equal chance of earning the

performance-linked incentive to generators as well as loads.

y With increased complexity of the power system, tariff hasbecame very complex and involved concept to realize.

y

A novel competitive power market in India is yet to evolve.


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1. www.powermin.nic.in

2. www.cea.nic.in

3. Electricity Act 2003, www.powermin.nic.in

4. Introduction to Availability Based Tariff, Kalki Communications Technology,

Bangalore, India. [Online]. Available: http://

www.kalkitech.com/downindex/Introduction To ABT.pdf

5. Impact of ABT on different Players, Kalki Communications Technology, Bangalore,

India. [Online]. Available: http:// www.kalkitech.com

6. ABT to Deregulated Power Market, Kalki Communications Technology, Bangalore,

India. [Online]. Available: http:// www.kalkitech.com

7. K.V.V. Reddy, Ashwani Kumar and Saurabh Chanana, Frequency Linked Pricing as

an Instrument for Frequency Regulation Market and ABT Mechanism,


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8. K.S. Chaube, Restructuring of the Power Supply Industry in India, Cigre Regional

meeting 2001- International Conference on Bulk Power Transmission System

Integration in Developing Countries, 8-10 November 2001, New Delhi, pp. IX-i - IX-

viii.

9. Rabidra Tripathy and S.K. Khiani, Restructuring of Power Supply Industry and

Privatization Subsidies as Social Responsibility , Cigre Regional meeting 2001-

International Conference on Bulk Power Transmission System Integration inDeveloping Countries, 8-10 November 2001, New Delhi, pp. IX-1 - IX-8.

10. Yog Raj Sood, Narayana Prasad Padhy and H.O. Gupta, Privatization of Power

Industry A Bibliographical Survey, Cigre Regional meeting 2001- International

Conference on Bulk Power Transmission System Integration in Developing

Countries, 8-10 November 2001, New Delhi, pp. IX-9 IX-16.

11.

Anjan Roy, M. G. Raoot, P. Pentayya and R. K. Medratta, Famework for FacilitatingPower Trading in India, Cigre Regional meeting 2001- International Conference on

Bulk Power Transmission System Integration in Developing Countries, 8-10

November 2001, New Delhi, pp. IX-25 IX-32.


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Role of Tariff in Regulation of Indian Power