Ui Mechanism

Date: 26th December 2005 Action Plan for Implementation of Intra-state Availability Based Tariff (ABT) 1. Introduction For the purpose of transmission of electricity, India has been divided into five regions namely, Eastern, Western, Southern, Northern and North-Eastern Regions. These regions have been interconnected to form a “National Grid” with a view of bringing reliability and stability in power transmission across the nation along with efficient usage of available resources.Prior to introduction of inter-state ABT, there was a lot of indiscipline in the grid operation in these regions resulting in frequent blackouts and islanding. There was lack of balancing between generation and demand for power on real time basis. This was mainly due to excessive generation in the northern and northeastern regions resulting in higher frequencies in these regions and over loads in western and southern regions resulting in lower frequencies in these regions.
In this context M/s ECC, USA, after a study in 1993-94 recommended to GoI to introduce Availability Based Tariff (ABT), in all the regions to bring about grid discipline. However after the constitution of CERC in 1998, the matter came under the purview of the CERC. In 1999, the CERC issued necessary orders and regulation for implementation of Inter-state ABT in India and ABT has been implemented region by region during 2002 and 2003. ABT was implemented in the Southern region with effect from 1st January 2003.The implementation of inter-state ABT has brought about substantial improvement in the grid operation resulting in Grid discipline and optimal utilization of the generation capacities. The implementation of Inter-state ABT has brought about the following improvements in the operation of the regional grid as indicated in the FOIR sub-committee report: a) Grid frequency has dramatically improved from 48 – 52 Hz range to 49. 0 – 50.
5 Hz range for most of the time. b) A higher consumer demand is being met, due to built-in incentives to maximize generation in peak-load hours. ) Generation stations are being operated according to real merit order, on region-wide basis, through decentralised scheduling. d) Hydro-electric generation is being harnessed more optimally than done previously. e) State’s share in central generating stations have acquired new meaning and grid discipline is encouraged. f) Open access, wheeling of captive generation and power trading has been enabled by placing in position the mechanism (UI) for handling deviations/ mismatches. ) States meet their occasional excess demand by over drawing from the regional grid and paying applicable UI charges to the under-drawing states.

2. Intra-state ABT Keeping in view the advantages of ABT, the National Electricity Policy issued under the provisions of the Electricity Act 2003 envisages introduction of intra-state ABT. The said policy, under clause 5. 7. 1(b) states as follows: “The ABT regime introduced by CERC at the National level has had a positive impact. It has also enabled a credible settlement mechanism for intra-day power transfers from licensees with surpluses to licensees experiencing deficits.SERCs are advised to introduce ABT regime at the state level within one year”.
The Forum of Indian Regulators (FOIR) constituted a sub-committee to recommend measures for implementation of intra-state ABT and the said sub-committee included Sri Bhanu Bhushan, Member, CERC and Sri S. D. Uklkali, Member, KERC amongst others. The FOIR sub-committee has furnished its recommendations to the FOIR in Nov 2005, a copy of which is enclosed. KERC is bringing out this Action Plan for implementation of intra-state ABT in the State. . Status of energy allocation to ESCOMs Since KPTCL has been barred from engaging in trading electricity with effect from 10.
6. 2005 in terms of section 39(1) of the Electricity Act 2003, GOK in GO No EN 131 PSR 2003 dated 10TH May 2005, has allocated the PPAs of KPCL, VVNL, Central Generating Stations and conventional IPPs to the ESCOMs on the basis of share of each ESCOM in total energy consumption in 2004-05 and the PPAs of renewable sources to the respective ESCOM based on geographical location of the project.KPTCL has indicated the ESCOM wise allocation of the installed capacity of conventional sources as follows in its letter dated 13. 7. 2005: |ESCOM |% Of capacity allocation | |BESCOM |45. 9492 | |MESCOM |9. 0908 | |HESCOM |20.
3598 | |GESCOM |15. 2678 | |CESCOM |9. 3324 |In the ERC for FY06, the projected energy availability has been allocated to the ESCOMs considering demand forecast made by each ESCOM, growth rate etc. Regarding power purchase cost from conventional sources, a uniform per unit rate has been worked out considering entire power purchase cost (fixed charges + energy charges + UI charges) from all the sources i. e. from CGS, SGS, IPPs etc and the same has been applied to the ESCOMs uniformly. (Power purchase cost from non-conventional sources vary amongst ESCOMs in view of allocation of PPA to the respective ESCOM),The estimated power purchase from conventional sources in FY06 includes drawal from UI source to an extent of 1062 MU as indicated by KPTCL/ESCOMs in the ERC.
The UI charge has also been included in the total power purchase cost and a uniform power purchase rate has been worked out for the ESCOMs. While one ESCOM may be responsible for causing the UI due to overdrawal, the UI charges are being met by all the ESCOMs since a uniform power purchase rate has been worked out. (It is also true that if one ESCOM is saving the UI charge by efficient management, the benefit is being shared by all the ESCOMs).Therefore in the present system there are no incentives for the individual ESCOMs for efficient management of the demand, nor there are penalties for inefficiency since the state as a whole is considered in the inter-state ABT and all the UI charges are being shared by them. As indicated by KPTCL, the above capacity allocation is in proportion to the actual energy drawal by the ESCOMs in 2004-05. Considering this as a transition arrangement, the capacity allocation should be made to each ESCOM after a systematic study considering various parameters including demand/peak load requirement, consumer profile etc in each ESCOM.Thereafter, the capacity charges (fixed charges) of the generating stations have to be allocated to the ESCOMs according to the capacity allocation and energy charges in proportion to the actual energy drawal in order to provide economic signals and efficient management of power purchase by the ESCOMs.
4. ABT, Intra-state ABT and its benefits: a) What is ABT: What is ABT and the mechanics of its operation are adequately explained in the premier “ABC of ABT- A premier on Availability Tariff” written by Sri Bhanu Bhushan, a copy of which is enclosed for reference. b) Intrastate ABT Components:Intra-state ABT is a techno-economic tool for bringing rational tariff structure for supply of electricity from State generators to the distribution Licensees apart from the fact that it is a mechanism for enforcing discipline in the Grid. The generation tariff under the ABT regime has three components namely the fixed charge, the variable charge and the Un-scheduled Inter-change charge (UI Charges) as follows: (i) Fixed charge covers capacity charges of the generators, which is payable by each beneficiary on the capacity allocated to them, irrespective of the amount of power they draw or scheduled to draw. ii) Variable charge (towards fuel cost/variable expenses of generation) is payable by each beneficiary on the scheduled energy irrespective of actual drawal. (iii) UI charge is payable by the beneficiaries/ generators for the deviations from the schedule and is dependent on the frequency prevailing at that time. c) Benefits of Intra state ABT: Intra-state ABT has the following benefits: • Benefits to the Power System: I.
Brings about grid discipline by maintaining frequency in technically feasible narrow band. II.Ensures optimal utilisation of available resources and generation capacities. III. Enhances opportunities for Open access, Captive generation wheeling and Trading of electricity. IV. Scope for encouraging competition among generators.
• Benefits to Generators: I. Encourages maximization of generation during peak hours with incentives and discourages the same during off peak hours with penalties. II. Compels drawal of power by the utilities as per the scheduled drawal failing which Generators stand to gain by applicable UI charges. III.Enables systematic scheduling in terms of long term, short term as well as day ahead, duly considering plant availability and maintenance. IV.
Ensures better life of equipments due to efficient management of Demand Vs Supply. Thereby the ‘Hidden Costs’ due to damage is avoided. V. The three-part Tariff under ABT provides for proper recovery of fixed and variable costs of Generator. • Benefits to the Licensees: I. Economic efficiency dictates that the least cost power should be dispatched in preference to costly power (Merit Order Dispatch). ABT provides for the same.
II.Licensees can plan their requirement, both for peak and off peak demands. III. Enables efficient Load Management through their own Area Load Dispatch Centers. IV. Provides for economical power and better accounting procedures. • Benefits to End Users: I.
Enables open access, captive generation, wheeling and trading of electricity. II. Ensures better quality and reliable power supply. III. Scope for reduction in cost of power due to licensees opting for merit order dispatch in their scheduling. 5. ABT & Retail Power Tariff: The Commission had also proposed introduction of differential tariff, i.
. separate tariff in each of the ESCOMs area to reflect the cost of supply in each ESCOM duly considering the consumer profile and revenue stream in such ESCOM. However, considering the suggestions received from the stakeholders, the Commission has introduced separate tariff for urban and rural areas in the Tariff Order 2005 and intends to move towards ESCOM-wise differential tariff in future. Cost of power purchase being the major input cost (more than 75% of the cost of supply), implementation of intra-state ABT may have substantial impact on cost of supply and the tariffs in each of the ESCOMs.The operational efficiencies in each ESCOM including efficiency in power purchase management under ABT would get reflected in the tariffs when such differential tariffs are determined. In view of the established benefits that have accrued under inter-state ABT, the question whether intra-state ABT is required does not arise since the same benefits as in inter-state ABT are expected to accrue to the ESCOMs/consumers. The question is only how soon intra-state ABT can be implemented.
The general consensus/ recommendation is that the methodology adopted for inter-state ABT should be replicated for intra-state ABT with modifications as may be required. No doubt, implementation of intra-state ABT is a complex exercise involving a number of ESCOMs, a large number of generating stations, a huge number of interface points, etc, but the exercise must begin. {{ 6. Mechanism of Intra-state ABT Under the intra-state ABT, all the State generating stations (which are subject to scheduling by SLDC) shall declare their 15-minute schedule of expected output capability for the next day to SLDC.Based on the information available to the SLDC in respect of all sources of power viz , i) Expected output capability from CGS as furnished by RLDC ii) Expected output capability from State Generating stations iii) Other sources, if any (CPPs) and iv) Losses in the system, The SLDC conveys the entitlements to each of the ESCOMs for the next day on the basis of allocated capacity. Immediately thereafter, the ESCOMs considering the entitlement and the forecasted demand would convey to SLDC their schedule of power drawal for the next day. The ESCOMs shall prepare their forecast for the next day systematically after considering the demand in the previous year, previous month, previous day etc duly considering changes in demand, seasonal variations, weather conditions etc.
). SLDC will aggregate the requisitions from the ESCOMs and prepares the dispatch schedule keeping in view the merit order and how best to meet the schedule given by the ESCOMs. After the exercise, the SLDC will issue, i) Dispatch schedule to RLDC for communication to the CGS ii) Dispatch schedule to the state generators ii) Dispatch schedule to others (CPPs) and iv) Drawal schedules to the ESCOMs. These schedules issued by SLDC will become the basis for ABT. In case of any contingencies, both the generators and ESCOMs can revise their requisitions and schedules and the same shall be revised correspondingly by the SLDC within the stipulated time. The schedules form the basis for payment of energy charges and any deviations from the schedule would attract frequency dependent UI charges. A typical flow diagram under the intra-state ABT is given below: INTRASTATE ABTINDEX: Flow of Confirmed Day ahead Dispatch schedule for Generators / IPPs / CPPs & Day ahead Drawal Schedule for Licensees / Open access consumers by RLDC/SLDC/ALDC.
Flow of Day ahead Availability of Generators/ IPPs / CPPs & Day ahead Requirement of Licensees/ Open access consumers to ALDC/SLDC/RLDC. (On similar lines long term and short term scheduling is also prepared. ) 7. Applicability of Intra-State ABT: Intra-State ABT shall be applicable to all generators that are connected to the Grid and are scheduled and dispatched by SLDC.As per the Grid Code being issued by KERC all Generators [excluding wind and minihydel] with installed capacity above 25 MW need to be scheduled and dispatched. All such generators shall come under the purview of ABT. It is to be noted here that FOIR has recommended generators of 10 MW & above to be scheduled.
Intra-state ABT shall be applicable to the following: i) All ESCOMs and Hukeri Society ii) All State owned generating stations iii) IPPs iv) Bio-mass and Co-generation plants above 25 MW. ) CPPs supplying power to the grid 8. Issues for implementation of Intra-state ABT: i) Metering: FOIR sub-committee has rightly pointed out that for implementation of ABT and Ui mechanism within the state, the activity on the critical path would be installation of special energy meters on the periphery of all entities which are to be covered by ABT and UI. The meters should be capable of recording all the parameters such as demand in MW, reactive power, power factor, frequency etc in a 15 minute block.The status of metering at interface points as indicated by KPTCL is furnished below: • No. Of interface points of ESCOMs with KPTCL: 1276 • No. Of inter ESCOM interface points: 50 • Auxiliary: 592 • Total: 1918 • Metered procured [0.
2 class]= 1650 • Balance required= 268 • Metered so far installed: 829(as on 30. 09. 2005) • As per the current status, 268 meters are yet to be procured and 1089 meters need to be installed at interface points. DETAILS OF INTERFACE POINTS (as at the end of Oct-2005) | | | |Interface Points |Voltage |BESCOM |MESCOM |GESCOM |HESCOM |CESCO |HUKKERI |TOTAL | | |(KV) | | | | | |SOCIETY | | |ESCOMS with KPTCL |11 |464 |81 |116 |159 |148 |4 |972 | |  |33 |4 |27 |46 |101 |5 |3 |186 | |EHT |66 |32 |0 |2 |1 |14 |0 |49 | |  |110 |0 |6 |9 |2 |0 |0 |17 | |  |220 |6 |1 |2 |1 |0 |0 |10 | |IPP |11 |5 |2 |4 |1 |10 |0 |22 | |  |33 |0 |0 |9 |10 |0 |1 |20 | |Total No. of |  | |117 |188 |275 |177 |8 |1276 | |Interface Points | | | | | | | | | |AUXILARY |  |267 |56 |69 |108 |89 |3 |592 | Since the required number ABT compliant meters have already been rocured by KPTCL for interface metering with ESCOMs and already 829 such meters have been fixed, it is expected that all the other interface points would be fixed with ABT compliant meters quickly. This should be completed before the end of March 2006. All the Grid connected generators that are scheduled and interface points of ESCOMs shall be provided with ABT compliant meters latest by 30th March 2006.
The respective Generating stations and KPTCL shall take action accordingly. Regarding metering of EHT/open access consumers including Captive users, the same shall be taken up by respective ESCOMs and completed before the end of March 2006. i) Communication facility: For effective implementation of intra-state ABT, metering data should be transferred form the ABT compliant meters to ALDC/SLDC on a real time basis. Hence adequate & reliable communication facilities should be established. ESCOMs have stated that the communication facility will be established by KPTCL. While KPTCL has stated that there is no communication link at present to acquire data on real time basis and hence new leased lines are required. Since ALDCs have to be established by the respective ESCOMs in order to provide load forecast to the SLDC on a daily basis, communication facility from the ABT compliant meters at the interface points to the ALDC/corporate office of the ESCOMs should be established.
When such facility is provided, the same linkage could also be extended to the SLDC parallelly for monitoring. iii) Finalisation of Capacity allocation to each ESCOM: As discussed earlier, the capacity allocation from various generating stations including CGS to the ESCOMs shall be made in a systematic manner. This requires a detailed study and careful analysis as this is being attempted for the first time in the state. KPTCL/ESCOMs shall take up a joint exercise in this regard. iv) Tariff: The basic requirement for implementation of ABT is a three-part tariff comprising of fixed charges, variable charges and UI charges in comparison with the existing single/two-part tariff. FOIR has also recommended adopting this tariff structure.As already stated, the fixed charge would be linked to availability and variable charges to the scheduled energy.
The UI charges shall be applicable for the deviations from the schedules. A three-part tariff for the central generating stations is already in force under the inter-state ABT. When the intra-state ABT is implemented, the fixed charges of the CGS have to be allocated to the ESCOMs according to the capacity allocation, energy charges according to the scheduled energy and UI charges for variation in the schedule given by each ESCOM. Regarding the tariff for the generating stations in the state, the position is as follows: The Commission has already approved PPAs as follows: ) A two part tariff for KPCL thermal station (RTPS) comprising of fixed charges based on normative PLF, energy charges for actual generation and incentive for actual generation beyond normative PLF. ii) A two part tariff for all KPCL hydro stations comprising of fixed charges linked to normative station availability, variable charges (only water royalty) for actual generation and incentive for higher availability of the stations. iii) A two part tariff for VVNL diesel station (Yelahanka Diesel station) comprising of fixed charges based on normative PLF, energy charges for actual generation and incentive for actual generation beyond normative PLF. However, the tariff approved by the Commission in all the above cases are yet to be implemented since the generating stations have appealed against the orders of the Commission.
As indicated by KPTCL/ESCOMs in the ERC for FY06, a two-part tariff is being followed only in respect of RTPS units 5,6 and 7 as per the draft PPA and in respect of all other units/stations cited above, a single part tariff is being followed. 2) Regarding IPPs in the State, a two-part tariff is being followed in respect of all the three IPPs (Tanirbavi, Tata and Rayalseema). 3) PPAs of VVNL hydro stations have not yet been placed before the Commission for approval. As indicated by KPTCL/ESCOMs in the ERC for FY06, a single part tariff is being followed at present. Therefore, in order to implement intra-state ABT, a two-part tariff should be implemented for all the generating stations within the state. KPTCL/ESCOMs shall take action accordingly to convert the existing single part tariff to two-part tariff in respect of all the stations. Regarding the third part of the tariff i.
e.UI charges, the UI rate determined by the CERC is already in force for inter-state ABT and it has been recommended by various experts including the FOIR sub-committee to adopt the same UI rate for intra-state ABT also. The Commission endorses this view and considers it appropriate to adopt the same till UI rate is determined by the Commission for intra-state transactions separately. Accordingly, UI rates and threshold frequencies for UI rate as determined by CERC shall be adopted for the present. The FOIR sub-committee has recommended that incentives for generating stations shall be linked to higher availability instead of to PLF. At present, the incentives in respect of CGS are linked to actual PLF and not to availability as per the existing CERC norms.KERC while welcoming the suggestion of the FOIR sub-committee to link the incentive to station availability so that the generating stations are better available for generation, it is of the view that during this transition period, it would, perhaps be better to continue the incentive to actual PLF achieved only as otherwise, the ESCOMs may be required to pay higher amounts even when the station availability is not fully utilized.
If incentive is provided to the generating companies linked to availability, the generators may recover incentives by declaring availability even without generating a single unit, specially so in the case of high cost energy sources. Therefore, the Commission would continue the incentive linked to actual PLF for the present. ) Setting up of Area Load Dispatch center (ALDC): Each of the ESCOMs have to set up an Area Load Dispatch Centre to monitor and control the drawal of power within the ESCOM, as per the schedule. As discussed earlier, real time communication from the ABT compliant meters to the ALDC/corporate office of the ESCOM is crucial for implementation of the ABT. These ALDCs shall be established before September 2006. vi) Up-gradation of SLDC: In order to handle the increased volume of data under Intra-state ABT and also to perform the functions of monitoring and energy accounting, the state load despatch centre needs to be up-graded suitably by providing necessary software, hardware, human resources and other infrastructure. ii) Scheduling & Energy Accounting: The ESCOMs, the generators within the state and EHT/open access consumers should make day ahead forecast for every 15 minutes time blocks under the ABT schedule, which requires expertise.
The schedules would be finalized by SLDC for ESCOMs and generators and by the Concerned ALDC’s for EHT/Open access consumers. viii) Gaming: Generators may overstate their availability under ABT regime as the recovery of fixed charges is linked to availability. Similarly, the generators may under declare the capacity to take advantage of UI charges. In either case there would be gaming by generators which need s to be avoided. Availability tests needs to be conducted through third party. If the units/station fails to demonstrate the declared capacity, penalty needs to be imposed.Further, the capacity charges should be reduced to the actual availability until the generator demonstrates higher availability.
Similarly, if availability is under-declared, the UI charges due to the generator has to be credited to UI pool. In addition, a penalty shall also be levied. In addition to the penalties, officer in charge of the generator shall be made responsible for misdeclaration. SLDC shall prepare a standard procedure for availability testing and maintain record of all such tests carried out. Regarding time block for UI, FOIR sub-committee has recommended a 15-minute time block. However, FOIR has stated that as an interim arrangement UI charges can be on 30-minute block. 9.
Training and Familiarization: Under intra-state ABT, energy accounting would be complex and requires computerization and trained human resource for efficient data management. For effective implementation of the intra-state ABT, the staff of SLDC and the ESCOMs need to be trained extensively. The staff of SLDC have already gained experience in operating the inter-state ABT, but they have to be further trained on intra-state transactions. KPTCL and ESCOMs shall send their concerned staff for appropriate training. This activity needs to be prioritsed and completed as per the time schedule indicated in forthcoming paras. 10. Responsibility for implementation:It shall be the joint responsibility of KPTCL and ESCOMs for implementation of intra-state ABT as it involves fixing ABT compliant meters at interface points, establishing communication facilities and monitoring and control of the operations under ABT.
As discussed earlier, KPTCL has already procured ABT compliant meters and installed a large number of them. Since KPTCL is exclusively in the business of transmission of electricity and SLDC being continued under KPTCL, KPTCL is in a better position to take care of the activities required for implementation of ABT because of its vast experience. Therefore, KPTCL shall take the responsibility to complete the interface metering with all the generating companies, with the ESCOMs and also inter-ESCOM metering irrespective of voltage level, with due coordination with the concerned ESCOMs.The ultimate responsibility for implementation of intra-state ABT shall be that of the SLDC. 11. Cost Sharing: As far as the costs involved are concerned, the cost of interface metering with the ESCOMs shall be borne by KPTCL only since KPTCL has already procured the meters and is in the process of its installation. Similarly the cost of up gradation of SLDC, upgradation of SCADA, requirement of hardware and software at SLDC etc shall be borne by KPTCL only.
However, the cost of providing real time communication of the interface points with the ALDC/ESCOMs (corporate office), along with required hardware and software, establishment of ALDC etc shall be borne by the respective ESCOMs.The cost of providing interface metering at inter-ESCOM points shall be borne by the ESCOM, which is feeding the other ESCOM. In the case of exchange of power between the ESCOMs, the ESCOM that has supplied a higher quantity in the preceding 6 months shall be responsible to install ABT compliant meter and shall bear the cost. The cost of providing ABT compliant meters at the generating stations shall be borne by the respective generating companies only. In a nutshell, it would not greatly matter who bears the cost of various activities under the ABT since ultimately, all the expenses are passed on to the consumers through tariff. 12. Phase-wise implementation of intra-state ABT:In view of the constraints in implementation of the intra-state ABT, it is proposed to implement the intra-state ABT in the following phases: First Phase: The Commission expects that the ABT compliant meters at the interface points before end of March 2006 and the required real time communication facility shall be in place before the end of May 2006.
From 1st June 2006, a proxy intra-state ABT shall be implemented for a period of six months. In this phase the generators and the licensees would participate in a proxy implementation of ABT. In this phase the existing meters available as on 1st June 2006 should be used and the data would be considered for half an hour period.The generators and ESCOMs would furnish a day ahead schedule to SLDC, which will finalise the schedule duly matching the generation and drawal schedule. It will also carry out energy accounting and would also compute the UI charges on a weekly basis. These charges are computed only notionally and ESCOMs/generators need not make any payment for violating the schedule. All the Generators, KPTCL and ESCOMs should make necessary arrangements to implement the same from 1st June 2006.
Second Phase: In this phase, the same procedure as in the first phase would be followed for period of next six months effective from 1st December 2006. However the generators/ESCOMs shall have to pay the ABT charges for the generation/drawal of power on half hourly basis.Third Phase: In this phase the Generators and ESCOMs would implement the Intra-State ABT in Toto, duly facilitating all the requirement of implementation of intra state ABT, with effect from 1st June 2007. The monitoring, energy Accounting and billing would be on a 15 minutes basis. In all the above phases, finalization of schedule, monitoring and energy accounting would be carried out by SLDC. Intra-state ABT for Hydro-stations The Commission notes that the average power purchase cost from hydro sources in FY06 from KPCL is about 54 paise per unit as per the ERC, which is far less than the energy charges from thermal sources. Therefore, the hydro sources are not generally under the merit order.
Further, FOIR sub-committee has pointed out that certain issues have come up recently in ABT for hydro stations particularly in North Eastern Region and have suggested that SERCs may exercise caution while extending ABT to intra-state hydro stations or wait for resolution of these issues issues by CERC for central stations. In view of these factors, the Commission proposes to postpone implementation of intra-state ABT to hydro stations for a period of one year. However, such stations shall complete all preparatory work for implementation of intra-state ABT as per the Action Plan and also provide day ahead availability / output schedule to SLDC. 13.