POWER TRADING

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POWER TRADING AND OPEN ACCESS IN INDIA 04.12.09
Mahendra Kumar
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Market Impression of the New Act

• Opening of Power Market
• Development of Power Market
• No licence required to install a generating
  plant.
• Generating company/ CPPs could sell power to any
  person.
• Any person, specially the industrial consumers
  could buy power from any SEBs/ Trader/ Generating
  Company/ Captive or Co-gen Power Plants of other
  persons.
• CTU/ STU/ Distribution Companies are obliged to
  provide open access.
• Electricity trading is a distinct activity.
• Open Access by STU/ Distribution Licensee is
  subject to surcharge which shall be used to
  compensate the cross subsidies of consumers.

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Provision in the Electricity Act, 2003

• 2(70) Supply means the sale of electricity
  to a licensee or consumer.
• 2(71) Trading means purchase of electricity
  for resale thereof.
• 9(2) Captive Generating Plant shall have the
  right to open access for the purpose of carrying
  electricity to the destination of his use.
• 10(2) A generating company may supply
  electricity to any licensee and may, subject to
  regulations under Section 42(2), supply
  electricity to any consumer.

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Open Access for

• Surplus power of State Generating Companies.
• Surplus power of State Power Utilities of the
  State and other Distribution Licensees.
• Sale of Unallocated / Surrendered Power of
  Central Sector Generating Companies.
• Un-requisitioned power of CSGS.
• Merchandise Power Plants.
• Captive Power Plants for their own use.
• Surplus power of CPPs (Captive or Co-gen)/ IPPs.
• Collective transactions through exchange.
• Purchase of power by a consumer.
• Renewable power with limitation on scheduling.

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Open Access by CTU/ STU

• Sec. 38(2) Non-discriminatory open access by
  CTU on payment of transmission charge and
  surcharge, as specified by CERC.
• Sec. 39(2)(d) STU to provide non-discriminatory
  open access for use by
• Any licensee or generating company on payment of
  the transmission charges or
• Any consumer as and when such open access is
  provided by the State Commission, on payment of
  the transmission charges and a surcharge thereon,
  as may be specified by the State Commission.

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Open Access by Distribution Licensee

• Section 42(2) The State Commission shall
  introduce open access in such phases and subject
  to such conditions, (including the cross
  subsidies, and other operational constraints) as
  may be specified within one year of the appointed
  date by it and in specifying the extent of open
  access in successive phases and in determining
  the charges for wheeling, it will have due regard
  to cross subsidy
• provided such open access may be allowed before
  cross subsidies are eliminated on payment of a
  surcharge in addition to the charges for wheeling
  as may be determined by the SERC.
• Provided such surcharge and cross subsidy shall
  be progressively reduced and eliminated in the
  manner as may be specified by the State
  Commission.

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• Opportunities
• For Generating Companies
• No licence required for developing a generating
  station
• could sell power to any person through open
  access
• Easy change in purchaser in the event of default
  in honoring the contract by the purchaser.
• For consumers
• Buy power from anywhere could explore cheaper
  sources specially useful for high demand
  industrial / commercial consumers.
• Industrial houses could consolidate power supply
  to plants at various locations and build captive
  power plant to achieve economy

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Current Power Trading

• Successful trading of surplus of distribution
  licensees, including SPUs , Bilateral or through
  traders
• UI acting as a tool for on-line trading
• Merchant power plants
• CPPs surplus power (struggling for trading)
• Collective transactions through exchange
• Market is trying to find path in jungle of
  financial problems, power shortage, high UI rate
  and other issues

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Categorization of Transmission customers

• Long Term For 12 years or more (changed from 25
  yrs in Regulation dt. 30.01.04 to 12 yrs vide
  Regulation dt. 7.08.09)
• Medium Term 3 months to 3 yrs (introduced vide
  Regulation dt. 7.08.09)
• Short Term Monthly basis, up to 3 months ahead

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• Challenges
• Adequacy and reliability of capacity in
  Transmission and Distribution systems for open
  access
• Commercial mechanism for deviation in scheduling
  vers. Actual drawal / Injection (UI)
• Commitment for back up power and its impact on
  the Consumer and Power Utility
• Open Access by CTU, STU and Distribution
  Licensees
• Impact of cross subsidy and program for phasing
  it out
• Impact of Open Access on financials of
  Distribution Licensees and their obligation to
  supply power to all consumers.

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Nature of Open Access and Necessity of Surcharge

• From the provisions of the Act, surcharge appears
  to be meant to compensate for cross subsidy.
• Cross subsidies of the Distribution Licensees are
  affected only when open access for supply is
  meant for subsidizing consumers (industrial
  consumers).
• Provision of Surcharge is not relevant in open
  access for supply of surplus power by State
  Generating Companies, any IPP or CPP outside the
  concerned State.
• Surcharge is relevant only in case of use of
  Distribution System of Distribution Licensee in
  whose area supply is given to a subsidizing
  consumer.

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Requirements for Open Access

• Commercial mechanism for transmission pricing for
  long , medium and short term open access
  including UI and transactions through exchange
• Approval of open access for the desired quantum
  and period of supply
• Non-discriminatory open access
• Freedom for scheduling of power
• Freedom for revision of schedule
• Freedom to revise the open access or cancellation
  thereof
• Policies could be different for Advance
  Scheduling, Day-ahead Scheduling or Booking
  of Open access, as the case may be
• Freedom to market that could boost the growth
• Appropriate settlement mechanism

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Open Access for Captive Power Generation

• Sec. 9(2) Captive Generating Plant shall have
  right to have open access for the purpose of
  carrying electricity from Captive Generation
  Plant to destination of his use.
• Section 38(2)(d) In case of Central
  Transmission System, surcharge shall not be
  leviable in case of open access is provided to
  Captive Generating plant for carrying electricity
  to destination of his use.
• Section 39(2)(d) In case of State Transmission
  System, surcharge shall not be leviable in case
  of open access is provided to Captive Generation
  plant for carrying electricity to destination of
  his use.
• Section 42(2) For use of Distribution System,
  surcharge shall not be leviable in case open
  access is provided to a CPP for carrying
  electricity to destination of his use.

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CERC Regulations for Short term Open Access

• Regulations Dt. 30.01.04
• Charges applicable in time blocks - 25 up to 6
  hrs, 50 for 6-12hrs,100 for 12-24 hrs
• Transmission charges _at_ 25 of previous year
  average, per MW basis
• Charges applicable on MW basis for corridor
  booked
• RLDC charges _at_ Rs 3000 and SLDC charges _at_ Rs.1000
  per day
• Charges for interregional system revised to 50
  of average previous year long term charges
• (Amendment dt. 21.02.05 - effective from
  1.04.05)
• CERC discussion paper dt.13.02.07
  proposing elimination of short term open access
  charges

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Regulation Dt. 25.01.08

• Transmission charges applicable for each
  Regional system _at_ Rs. 30/MWH (revised to Rs.
  80/MWH vide amendment dt. 20.05.09)
• No transmission charges applicable for
  inter-regional system
• Operating Charges revised to Rs 2000 per day for
  each RLDC/SLDC
• Applicant to obtain SLDC consent in advance

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• Procedure for Scheduling of Bilateral
  Transactions
• (Issued by CTU on 28.01.2008)
• SLDC consent to be obtained for each specific
  transaction in booking of open access,
  first-come-first-serve booking, day-ahead
  scheduling etc.
• In case of transmission constraints, bilateral
  transactions would generally be curtailed first
  followed by collective transaction (Para 12.2)
• In case a State Utility is Buyer or Seller, the
  operating charges and transmission charges shall
  not include the charges for that state network
  (Para 13.1.4)
• Vertical disintegration of state utilities need
  to be recognized

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Regulation Dated 7.08.09

• For Long Term and Medium term Open
• Access in Inter State Transmission
• Open access , SLDC charges in line with long
  term open access as notified from time to time
• Scheduling to be done on day ahead basis
• Medium Term Open Access introduced for period of
  3 months to 3 years
• Long term period reduced from 25 years to 12
  years

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Conclusion

• Power trading in India is in infant stage and has
  high potential for growth
• Provision of Open Access was a step towards
  commercialization of power market with high
  growth potential.
• Removal of cross subsidy and surcharge need to be
  done with a time bound program.
• Freedom to operators is an essential part of the
  process.
• Open Access charges / losses based on commercial
  principles to optimize use of existing assets and
  to encourage investment.
• Commercial mechanism for deviation in scheduling
  (settlement mechanism) need to be introduced at
  all levels, including the consumers level.
• Open access process, charges and priorities need
  to be non-discriminatory
• Open access to renewable power , CPPs, Merchant
  Power Plants etc. needs special attention that
  may help in development of power market.

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Thank you
04.12.2009