Evolution and Commercial Aspects

of Power Trading in India

29th - 30th April 2014 |Mumbai, India
 Topics Covered.

 Development of power sector in brief.

 Enactment of various acts.

 Developments related to Power Trading.

 Explanation of Open access and it’s consequences.

 Commercial aspects of power trading explained through

selected CERC regulations.

 Links to certain CERC regulations.

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Development of power sector in brief
 Indian electricity act 1910 laid down the basic framework for electricity
supply.

 The power sector in India has undergone significant progress after

Independence. When India became independent in 1947, the country had a
power generating capacity of 1,362 MW.

 Hydro power and coal based thermal power have been the main sources of
generating electricity.

 Generation and distribution of electrical power was carried out primarily

by private utility companies at the time of independence. Power was
available only in a few urban centers.

 In the Constitution of India “Electricity” is a subject that falls within the

concurrent jurisdiction of the Centre and the States.

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 The Electricity (Supply) Act, 1948
 Mandated creation of SEBs.

 Need for the State to step in (through SEBs) to extend electrification (so
far limited to cities) across the country.

 The Central Electricity Authority constituted under the Act is

responsible for power planning at the national level.

 Main amendments to the Indian Electricity Supply Act

 Amendment in 1975 to enable generation in Central sector.
 Amendment to bring in commercial viability in the functioning SEBs – Section
59 amended to make the earning of a minimum return of 3% on fixed assets a
statutory requirement (w.e.f 1.4.1985) .
 Amendment in 1991 to open generation to private sector and
establishment of RLDCs.
 Amendment in 1998 to provide for private sector participation
transmission, and also provision relating to Transmission Utilities.

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 The National thermal Power Corporation (NTPC) and National Hydro-electric
Power Corporation (NHPC) were set to enable generation in central sector in 1975.

 To construct, operate and maintain the inter-State and interregional transmission systems the
National Power Transmission Corporation (NPTC) was set up in 1989.The
corporation was renamed as POWER GRID in 1992.

 The Electricity Regulatory Commission Act, 1998

 Provision for setting up of Central / State Electricity Regulatory Commission with powers to
determine tariffs.
 Constitution of SERC optional for States.
 Distancing of Government from tariff determination.

 The Electricity Laws (Amendment) Act, 1998 passed with a view to make transmission
as a separate activity for inviting greater participation in investment from public and private
sectors.

 The Electricity Act Of 2003.

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 Key features of EA 2003
 Consolidated laws relating to G, T De-licensing of generation
& D, Trading and Use of electricity
 Introduced measures conducive Development of a Multi-Buyer Multi-Seller
framework in power
to Development of Electricity
Industry, promoting Competition
therein, Introduced Tariff based Competitive Bidding for
procurement of Power
 Emphasized protection of
Consumer Interest Provision of Non-discriminatory Open Access
 Promotion of Efficiency and Clean
Energy Provision of Parallel licence in Distribution
 Identified distinctive functions of
Central Electricity Authority, Load Thrust to Universal Service Obligation (USO)
Dispatch Centers & Regulatory
Commissions Setting up State Electricity Regulatory Commission
(SERC) made mandatory
 Established Appellate Tribunal for
Electricity
Development of National Electricity Policy (NEP-
2005) and National Tariff Policy (NTP-2006)

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 • Facilitator for market participant in finding counterpart.
PTC • Low volume relative to huge demand.
1999-2000

• Incentives for generator for efficient operations and central dispatching.

ABT • Grid security problems due to overdraw in high UI charge.
2002-2003

• Identified trading as an distinct licensee activities.

Electricity
act • Provide provision for open access.
2003-2004

•Bilateral trading based on voluntary agreement of participant.

•Lacked transparency in price discovery.
Open
access •Transaction cost hindered small players in entering the market.
2004-2005

•The electricity market in transparent manner.

•Facilitating the power trading among the players.
Power
Exchange •Clear signals for capacity addition.
2008-09
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 Bilateral

Short Term Exchange

UI
Indian Power
Trading Scenario
Medium Term Bilateral

Long Term PPA’s

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Industry structure Post EA 2003

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 Tariff Evolution

Market Reform from Single Part Tariff to Multilateral Transactions

1991-2002 : ISGS
two-part tariff
•Bilateral market in Post 2008 :
intra-region parallel Multilateral
Pre-1991 : mode Transactions
ISGS Single- •Few transactions 2002-2008 :
(month-wise) ISGS Three-part •Era of true
part tariff competitive markets
•Two-part tariff tariff (ABT)
•Bilateral •CGS Share trades in •UI, Bilateral and
transactions in form of over drawal/ •Electricity Act: Collective
radial transfer underdrawal Emphasis market transactions
mode Development •Very large
•Very few one-to- •Real-time market transactions
one transactions •Multiple regions in •Trading on hourly
(3-month / year) parallel basis
•Single-part tariff •Large transactions –
UI market Vs Bilateral
market
•Trading on Day and
ToD basis

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Transmission – Creation of National Grid

March 2003
West synchronized
With East & Northeast Unified
NEW Grid
Grid
October 1991
East and Northeast
synchronized
Sou
th
Central Gri
Grid d
December 2013, The
mission of ‘One
August 2006, Nation-One Grid-One
No North Frequency’
rth synchronized accomplished
With Central Grid
Ea
W st
est
Northeast
Sou Creation of national grid in
th perspective to counter the regional
imbalances and optimally utilize the
Five Regional Grids available resources
Five Frequencies

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Market maturity stage

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Indian Power Market: Present Status
Long Term Power Purchase Agreements
Upto 25 Years 89%

OTC
Medium Term Licensed traders (61)
3 months- 3years 6%
OTC Intraday- 3 months
Short-Term Exchanges
Intraday - 3 months 1. Intra-day
2. DAM 3%
3. DAC
4. Daily
5. Weekly

Balancing Market
Unscheduled Interchange 2%
Real Time

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 What is Open Access
 Open Access as defined in Electricity Act’ 2003
 “Non-discriminatory provision for the use of transmission lines
or distribution system or associated facilities with such lines or
system by any licensee, or consumer, or a person engaged in
generation in accordance with the regulations specified by the
Appropriate Commission”.

 Open Access – What it means for the generators and

distributors
 Perhaps the most important features of the EA 2003
 Gives distribution companies and eligible consumers the
freedom to buy electricity directly from generating companies
or trading licensees
 Similarly the generating companies have the freedom to sell to
any licensee or to any eligible consumer.

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 Consequences of Open Access

 Non-discriminatory access over the transmission system

 This is a pre-requisite for power trading, bilaterally and
through energy exchanges, on scheduled basis among
utilities, permitted consumers and generators located in
the different States or regions of the country.
 Enable better utilization of available resources
 Facilitates the harnessing of untapped sources of power
including captive, cogeneration and merchant generating
capacity.
 Provides for competition resulting in a better deal for the
final customer.
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1st Meeting of TF 3| 29th -30th April 2014
Open access in Inter State Transmission
Regulation - 2008

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 Types of Transactions
 Bilateral transaction :-
 A transaction for exchange of energy (MWh) between a
specified buyer and a specified seller
 Can be directly or through a trading licensee or discovered at
power exchange through anonymous bidding
 From a specified point of injection to a specified point of drawl
for a fixed or varying quantum of power (MW)

 Collective transaction:-
 A set of transactions discovered in power exchange through
anonymous, simultaneous competitive bidding by buyers and
sellers.

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 Important Features
 Priority to use the Inter-State Transmission network :-
 Long term customers
 Medium term customers
 Short term customers
 Nodal Agency for bilateral transactions:-
 RLDC of the region where point of drawl is located.
 Nodal Agency for Collective transactions:-
 NLDC
 No objection certificate from SLDC:-
 Required for both bilateral and collective transactions.

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 RLDC/NLDC
NODAL
AGENCY

BILATERAL/COLLECTIVE TRANSACTION

TRADING
LICENSEES

BUYERS SELLERS

POWER
EXCHANGES

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Procedure for Submission of Application
For Short Term Open Access ( STOA).
 Customer or Power Exchanges submits an application to the
nodal agency.
 Details to be submitted
 Names and location of supplier and buyer
 Point of injection, point of drawl
 Starting time block and date, ending time block and date
 Contracted power (MW) to be scheduled
 Application fee of 5000 Rs. for each bilateral transaction or the
collective transaction has to be deposited.
 No objection certificate from SLDC to be submitted along
with the application.
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 Procedure for Advance Scheduling for
bilateral transactions
First phase:
 Applications accepted up to the fourth month before the
month of transaction.

January February March April

 Application can be submitted till last date of Jan for transaction in April .

 Separate application shall be made for each transaction.

 All applications taken together for consideration.
 Nodal agency conveys acceptance or rejection by 5th of
second month. ( In this case, 5th Feb).

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 Procedure for Advance Scheduling for
bilateral transactions
Second phase:
 Applications accepted up to five days before last date of third
months prior to the month of transaction.

February March April

 Application can be submitted till 23rd of Feb for transaction in April.

 Separate application shall be made for each transaction.

 All applications taken together for consideration.
 Nodal agency conveys acceptance or rejection by end of the
month of application. ( In this case, by end of Feb).

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 Procedure for Advance Scheduling for
bilateral transactions

Third phase:
 Applications accepted up to 10 days before last date of one
months prior to the month of transaction.
March April

 Application can be submitted till 21st of March for transaction in April.

 All applications taken together for consideration.
 Nodal agency conveys acceptance or rejection by 5 days
before end of the month of application. ( In this case, by 26th of
March).

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 Procedure for Scheduling for bilateral
transactions

Fourth phase:
 Applications considered on first come first serve basis.
 Applications accepted up to 4 days prior to date of
transaction.
 Nodal agency conveys acceptance or rejection within 3days of
receipt.
 Example – If there is a bilateral transaction planned on 20 th April,
application is accepted up to 16th April. However application can be
submitted earlier also. The acceptance will be granted in each case and all
applications are not considered together in this case.

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 Procedure for Scheduling for bilateral
transactions

Fifth phase:
 All applications clubbed and treated at par.
 Applications submitted between 3 days prior to date of
transaction and 15.00 hrs of the day before the date of
transaction.
 Applications considered after processing collective
transactions.
 Example – If there is a bilateral transaction planned on 20 th April,
application is submitted between 17th April and 15.00 hrs of 19th April. The
acceptance will be granted in each case and all applications are not
considered together in this case.

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Procedure for Scheduling for bilateral
transactions in contingency.

Sixth phase:
 Applications submitted after15.00 hrs of the day before
the transaction.
 These are submitted in case of a contingency .
 Nodal agency accommodates the request if feasible.

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 Congestion management
 Applicable in case where any transmission corridor gets
congested while considering applications in any phase
mentioned earlier.
 Electronic bidding conducted for grant of transmission
right.
 Any entity who do not participate in the bidding will be
deemed to have withdrawn his application.

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 Revision and curtailment
 Transactions can be cancelled or revised downwards. No
upward revision is permitted.
 Two days clear advance intimation is required in general.
 RLDC can cancel or curtail any transaction for improving
grid security etc.
 Short term transactions will curtailed first, followed by
medium term and lastly long term.
 Bilateral transactions shall be curtailed first followed by
collective transaction.

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Transmission charges payable by short term
customers:
Type of transaction Transmission RLDC concerned
charge (Rs/ MWh) decided by the
Bilateral, intra-regional 80 points of injection
Bilateral, between adjacent 160 points of injection
regions
Bilateral, wheeling through 240 points of injection
one or more intervening
regions
Collective transactions 100 each point of
injection and for each
point of drawl
Intra state As calculated by State
commission or 80

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Operating charges payable by short term
customers:
 Operating charge: The operating charges include fee
for scheduling, system operation and collection and
disbursement of charges.

Type of Transaction Charges

Bilateral 2000 Rs. Per day or part of day for each
bilateral transaction for each LDC’s involved
Collective transactions PX’s will pay 5000 Rs. Per day to NLDC and Rs.
2000 per day to each SLDC involved

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Other Issues
 Nodal Agency:
The nodal agency for bilateral transactions shall be the
Regional Load Dispatch Centre of the region where point
of drawl of electricity is situated and in case of the
collective transactions, the nodal agency shall be the
National Load Dispatch Centre.
Application Fee:
 An application made for each bilateral transaction or the
collective transaction shall be accompanied by a non-
refundable fee of Rupees five thousand (Rs.5000/-) only.

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Deviation Settlement Mechanism and related
matters - Jan 2014 – Salient Features

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 Objective of Regulation

 The objective of these regulations is to maintain grid

discipline and grid security as envisaged under the Grid
Code. through the commercial mechanism for Deviation
 The above objective shall be applied through the
Commercial Mechanism applicable to the drawl and
injection of electricity by the users of the grid.
 Applicable to sellers and buyers involved in the
transactions facilitated through short-term open access
or medium-term open access or long-term access in
inter-State transmission of electricity

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 Charges of Deviation
 Payable by Buyer for over drawl
 Payable by seller for under injection.
 Receivable for under drawl by buyer.
 Receivable for over injection by seller.
 Frequency is the average frequency of a time block.
 Charges are nil if frequency is more than 50.05 Hz
 Charges are 824.04 Paisa per unit ( Maximum) if frequency is
less than 49.70.
 In between steps
 0.01 Hz step is equivalent to 35.60 Paise/kWh in the frequency range of
50.05-50.00 Hz
 20.84 Paise/kWh in frequency range 'below 50 Hz' to 'below 49.70 Hz

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1st Meeting of TF 3| 29th -30th April 2014
Conditions related to payment of UI Charges
 Payable by Buyer for over drawl
 Payable by seller for under injection.
 Receivable for under drawl by buyer.
 Receivable for over injection by seller.
 Frequency is the average frequency of a time block.
 Charges are nil if frequency is more than 50.05 Hz
 Charges are 824.04 Paisa per unit ( Maximum) if frequency is
less than 49.70.
 In between steps
 0.01 Hz step is equivalent to 35.60 Paise/kWh in the frequency range of
50.05-50.00 Hz
 20.84 Paise/kWh in frequency range 'below 50 Hz' to 'below 49.70 Hz

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 Additional Conditions
 There are some additional conditions where the applicable
rate is capped or not applicable. Some of then are enumerated
below :-
 On Under drawl by Buyers – Charges shall be zero if deviation in a
time block is more than 12% of schedule or 150MW whichever is
less.
 On Over Injection by Sellers – Charges shall be zero if deviation in a
time block is more than 12% of schedule or 150MW whichever is
less.
 On breaching the limit of 12% - Additional charges are levied.
 The charges for injection for infirm power( Power injected by the
unit during testing before the commercial operating date) separately
defined depending upon the fuel being used. The volume capping
mentioned above is also not applicable.

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 Some Relevant CERC Regulations
 http://cercind.gov.in/Regulations/Open-Access-Regulations-2004-and-Amendments-
Incorporated.pdf . 30th Jan’2004. Long term > = 25 years. Max duration of short
term 1 year. Long term have higher priority.
 http://cercind.gov.in/Regulations/CERC_Open-Access-in-inter-State-
Transmission_Regulations-2008.pdf. 25th Jan’2008 Open Access in inter-State
Transmission Regulations, 2008. This is the Principal regulation.
 http://cercind.gov.in/Regulations/Notification-
Fixation%20of%20Trading%20Margin,%20Regulations%202010.pdf 11th Jan 2010.
Fixation of Trading margin regulation
 http://cercind.gov.in/2012/sharing_regulation/UI_Amendments_2011_dated_15.2.20
12.pdf Unscheduled Interchange charges and related matters
 http://cercind.gov.in/2014/regulation/noti132.pdf Dated 6th Jan 2014.
Deviation Settlement Mechanism and related matters
 http://cercind.gov.in/2012/regulation/Sharing_Regulations_2nd_Amendment_28
_3.pdf .

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 Points to ponder
 Is the story of the Evolution of Power Trading in India
relevant to the Evolution of Cross Border Electricity
Trade.
 Are commercial aspects that we have discussed relevant
to the tariffs and Charges that need to be applied on
cross border trade.
 Do we find a lead here as to how the transmission
capacity of the Cross Border lines can be allocated for
transactions.
 The long term trade will involve other issues but do we
now have the material necessary to jump start the short
term Trade.

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THANK YOU

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