Evolution of Power Tariff

Pre-1992 period

Single part tariff considering the fuel cost and other costs assuming a certain level of minimum performance

Post-1992 period Two part tariff

a) Fixed charge (full recovery at specified level of performance)

b) Variable charge (fuel charge) including FPA (Fuel Price Agreement)

December 2002 onwards Availability based tariff (ABT) Three part tariff

a) Capacity chargeb) Energy charge including FPA (schedule based)c) Unscheduled Interchange charge

What Availability means in ABT?It is the readiness of the generating station to deliver Ex-Bus output i.e. D.C declared.

It is different from the earlier terminology which includes only the status whether in service (100%) or out of service (0%).

The term availability in the present context could be defined as the MW capability of the generator for supplying to the grid after accounting for planned and unplanned outages, auxiliary consumption and deration due to non-availability of auxiliaries, fuel, water etc.That is why DC in ABT regime is also known as effective availability factor (E.A.F.)

N

Availability = 10000 x DCi / {N x IC x (100-AUXn)} %(Effective Availability) i=1

where

IC = Installed Capacity of the generating station in MW,DCi = Average Declared Capacity for the ith day of the period in

MW,N = Number of days during the period, andAUXn = Normative Auxiliary Energy Consumption as a

percentage of gross generation

COMPONENTS OF A.B.T

CAPACITY CHARGES

ENERGY CHARGES

UNSCHEDULED INTERCHANGES

INCENTIVE

AVAILABILITY BASED TARIFF (ABT)

Capacity Charge payable based on Declared Capability (DC)

Energy Charge realised on Scheduled Generation (SG) and not on actual generation i.e. variable charge payable on commitment from constituent

Frequency linked incentive/penalty for Unscheduled Interchange (UI)

Incentive payable on scheduled generation based PLF corresponding to target Plant Load Factor(80% for FGPS).

Capacity Charges• Return on Equity• Depreciation• O&M Charges• Interest on Working Capital• Interest on Loan• Taxes on Income, if any

Energy Charges• Cost of Primary Fuel (Coal, Gas)• Cost of Secondary Fuel

1.Opening capital cost for NTPC Faridabad for the tariff order 2004-09 is 940.91 Crores. 2.Debt equity ratio in case of Faridabad is 50:50.3.Depreciation is calculated annually by straight line method and is allowed up to 90% cost of assets excluding the cost of land which is 8377 Lacks.4.Return on equity as approved is 14% per annum and return on equity comes as 6586 Lacks per year.

Capacity Charges

Interest on Loan

Working Capital for calculation of capacity charges

• O&M expenses for one month• Fuel cost for one month corresponding to

Target Availability (80%)• 15 days stock of liquid fuel (~500 MT)• Maintenance spares maximum of 1% of

historical capital cost escalated @ 6% per annum from COD (Commercial Operation Date)

• Receivables equivalent to two-months average billing calculated on Target Availability (80%).

O&M COST

Fuel cost component of working capital

Receivable component of working capital

Unscheduled Interchange (UI) Charges:

• UI Charges=Actual generation - Scheduled generation.

• Payment of Energy charges corresponding only to Schedule given to generator.

• Concept of UI was introduced to discipline the grid and act as a road block to Unscheduled overdrawls from Grid which can lead to Grid collapse.

•From 7th January 2008 New rates of UI were introduced by CERC so that the unscheduled costly power (RLNG/Liquid) generation capacity of Stations gets schedule thereby curtailing the over drawls.

•Maximum rate for UI as per the new rates is Rs. 10 Below 49 Hz. and thereafter 18 paisa decrement from Rs.10 per 0.02 Hz. Increment in average frequency of block till 49.8 Hz and thereafter 8 paisa decrement per 0.02 Hz increment in average frequency of Block till 50.5 Hz.

•Above 50.5 Hz. any generation in excess of Scheduled generation will not fetch any UI to the generator.

U.I. rates Applicable with effect from 7.1.2008:

As the customer makes the payment of energy charges to the generator only for the scheduled generation it becomes imperative for the generator to determine the breakeven frequency for the fuel being used for UI so that loss is not incurred on part of generator due to UI.

Breakeven frequency is that frequency above which the any excess generation by generator will cause a loss to generator as fuel cost for the excess generation will supersede the UI charges to be received by generator for the same.

So, attempts should be made so that no excess generation w.r.t to schedule is done if average frequency of the block is expected to be more than breakeven frequency of UI fuel.

Concept of Breakeven Frequency (B.E.F.)

As per the prices of fuel in April-2008 B.E.F.s for FGPS-----

B.E.F. (APM-PMT) - 50.24 Hz.B.E.F. (R.L.N.G.) --- 49.44 Hz.B.E.F.(Liquid)------- 49.30 Hz.

Breakeven Frequency for FGPS

Scheduling Methodology

Each day starting from 00:00 hr. will be divided into 96 time blocks of 15-minute interval.

The generator will make an advance declaration of

capability of its generating station.

The declaration will be for the capability of the generating station to deliver ex-bus MWh for each time block of the day. The DC, as declared by generator, would form the basis of generation scheduling.

While making or revising their DC, the generator shall ensure that their DC during peak hours is not less than that during other hours. However, exception to this rule shall be allowed in case of tripping/re-synchronisation of units as a result of forced outage of units.

Based on the declaration of the generator, RLDC/SLDC (Regional Load Despatch Centre/State load dispatch centre) shall communicate their shares to beneficiaries out of which they shall give their requisitions.

Based on the requisitions given by beneficiaries and taking into account technical limitations on varying the generation and also taking into account the transmission system constraints, if any; RLDC/SLDC shall prepare the economically optimal generation schedule and drawal schedule and communicate the same to generator and beneficiaries.

In case of forced outage of a unit, RLDC/SLDC will revise the SG on the basis of revised DC. The revised DC and revised SG will become effective from the 4th time block, counting the time block in which the revision is advised by the generator to be the first one. In case of revision of DC due to problem in auxiliaries the revision will come into effect from the 6th time block 1st block being the one in which the intimation is made to RLDC/SLDC.

In the event of bottleneck in evacuation of power due to any constraint, outage, failure or limitation in the transmission system, associated switchyard and substations owned by CTU (as certified by RLDC/SLDC) necessitating reduction in generation; RLDC/SLDC will revise the schedules which will become effective from the 4th time block, counting the time block in which the bottleneck in evacuation of power has taken place to be the first one. Also; during the first, second and third time blocks of such an event, the SG of the station will be deemed to have been revised to be equal to AG and also the scheduled drawals of beneficiaries will be deemed to have been revised to be equal to their actual drawals.

In case of any Grid Disturbance, SG of all Generating Stations shall be deemed to have been revised to be equal to their AG for all time blocks affected by the Grid Disturbance. Certification of Grid Disturbance and its duration shall be done by RLDC/SLDC.

Revision of DC by generator(s) for the remaining period of the day will also be permitted with advance notice.

(i) Any generation up to 105% of DC in any 15-minute time block and averaging up to 101% of the average DC over a day shall not be construed as gaming, and the generator shall be entitled to UI charges for such excess generation above SG.

(ii) If gaming is found by the RLDC/SLDC, the corresponding UI charges due to the generating station on account of such extra generation shall be reduced to zero and the amount shall be adjusted in UI account of beneficiaries in the ratio of their capacity share in the generating station.

Demonstration of DC:

The generating company may be required to demonstrate the DC of its generating station as and when asked by the RLDC/SLDC of the region in which the generating station is situated. In the event of the generating company failing to demonstrate the DC, the capacity charges due to the generator shall be reduced as a measure of penalty.

The quantum of penalty for the first mis-declaration for any duration/block in a day shall be the charges corresponding to two days fixed charges. For the second mis-declaration the penalty shall be equivalent to fixed charges for four days and for subsequent mis-declarations, the penalty shall be multiplied in the geometrical progression.

The operating log books of the generating station shall be available for review by the Regional Electricity Board. These books shall keep record of machine operation and maintenance.

Issues specific to Gas stations

The capacity depends upon ambient temperature

In winter, DC more than the Installed Capacity can be given if the same can be demonstrated

Effect of frequency on generation

As the capacity of Gas generating stations decline with reduction in frequency the DC of Gas stations is to be declared assuming the frequency to be 50 Hz. If the average frequency of the block is less than 49.52 Hz but more than 49.02 Hz. the DC will be deemed to be reduced by 1.5% of declared DC and in case it drops below 49.02 Hz the DC will be deemed to be reduced by 3.5% of declared DC.

This will lead to reduction of SG accordingly corresponding to DC and term corrected scheduled generation CSG evolves which takes into account the variations due to frequency factor.

Operation Norms for Faridabad

Target Availability for full fixed cost recovery 80 %

Target PLF for Incentive 80 %

Gross station Heat Rate CC 2000Kcal/KwhOC 2900Kcal/Kwh

Aux Power Consn. (APC) CC 3 %

OC 1%

Energy Charges

Energy Charges = (B.E.C.+F.P.A+MOPA)* Corrected SG

B.E.C---Base energy charges (Rate of fuel prevailing in the beginning of period of tariffF.P.A.---Fuel price adjustement(factor to take of any

variation between the current prices and B.E.C.)M.O.P.A.—Monthly operating pattern of open cycle

generation (factor to account for open cycle generation)SHRno-2900Kcal/Kwh,APCno-1%,SHRnc-2000Kcal/Kwh,APCnc-3%.POCM-Percentage Open cycle generation for the month

Profit of Power generator due to Operational methodology

• Constituents of Profit for power generator arises mainly from three sources in the ABT regime-

• Marginal contribution

• U.I.

• Incentive

Marginal Contribution

• The energy charges paid by customer to power generator is CSG multiplied by the per unit energy charges calculated on the basis of normative heat rate and A.P.C.

• WhereasVariable Charges incurred by the generator depend upon its actual heat rate and APC.So for an efficiently operating station Variable charges will be less than the recovery of Energy Charges from customer.

• Difference between the energy charges (recovery from the customer for unit generation) and variable charges (actual cost incurred per unit of generation) is termed as marginal contribution.

Multiple fuel operation in ABT

• DC is to be given separately on separate fuels so is the case of SG.

• Station giving DC on multiple fuels will be treated as multiple stations operating on single fuels

• So the correction in DC will be imparted to individual fuel DCs.

• Two guiding ratios with multifuel operation are—1.AG/CSG in case of liquid should not be less than 99.5% in a month.2.AG/DC in case of gas fuel should not exceed 102% in a day and 101% in a month

OPERATION PHILOSOPHY UNDER ABT

Commercial declaration of DC without gaming

Advance/prompt intimation of DC revisions

Conservative DC declaration during start-up

Generation above SG (up to 105% of DC in a block and up to 101% of DC over a day) during low freq. spells

Generating slightly less in case the frequency is above the breakeven frequency.

Example of UI Optimization Scheme