T RANSMISSION P RICING

EVOLUTION OF TRANSMISSION PRICING

Stage I
Cost of Transmission clubbed with Generation Tariff

Stage II
Determined on the basis of energy drawn (Usage Based)

Stage III
Determined on the basis of MW entitlements (Access Based)

Stage IV
Hybrid Methodology like Nodal Based.

Upto 1991

19922002

20022011

2011 onwards

EA-2003 A ND N ATIONAL E LECTRICITY P LAN

EA-2003: Facilitate competitive markets

Generation De-licensed
Non-Discriminatory open access Efficient, coordinated and economical development of ISTS Prior agreement with beneficiaries not a pre-condition for ISTS development CTU/STU should undertake network expansion after identifying the requirements in consultation with stakeholders and taking up the execution after due regulatory approvals. Transmission tariff to be made sensitive to distance, direction and quantum of flow.

TARIFF POLICY ON TRANSMISSION PRICING

Sensitive to distance, direction and quantum Sharing in proportion to utilization Facilitate planned development/augmentation Discourage non-optimal investment

Prior agreement not pre-condition

Apportionment of losses- distance and direction sensitive.

NEED FOR CHANGE IN PRICING FRAMEWORK

Synchronous integration of Regions.

Changes caused by law and policy. Open Access and Competitive Power Markets

Pricing Inefficiencies.

National Grid / Trans-regional Grid

Changing Network utilization. Agreement of beneficiaries a challenge.

T YPES

OF

TARIFFS

Postage stamp Contract Path Method

MW-Mile
Point of Connection

P OSTAGE S TAMP M ETHOD

A postage stamp rate is a flat per kW charge for network access within a particular zone, based on average system costs. Postage stamp transmission tariffs allocate total system costs to consumers on the basis of load share/Energy share. This method results in higher costs above marginal costs because it incorporates historical fixed costs. The cost for transmitting power within the zone is independent of the transmission distance. A generator transmitting to a load in a different zone would have to pay the postage stamp charges for the zone of origin and the zone of delivery, and also any intervening zones. This accumulation of zone access charges is often called pan-caking

P OSTAGE S TAMP M ETHOD

The advantage of using this method is that it is easy to administer. It does not reflect marginal costs except in a special circumstance where all generators are at equal distances from load and where the load on each line is equal. In this method the total charge has been divided into two components

Actual power Transmission charges

Charges for transmission losses

T HE MW-M ILE

METHOD

The MW-Mile method calculates the flow at each circuit caused by the generation/load pattern of each agent based on a power flow model. Costs are then allocated in proportion to ratio of power flow and circuit capacity. According to this method the embedded cost of transmission facility is allocated based on the changes in power flow caused by a transaction in a transmission line and length of the line. This method is also called Line-by-Line method.

T HE C ONTRACT PATH METHOD

Sensitive to distance:

The contract path shall be the shortest route formed by series of transmission lines capable of carrying contracted power between the point of receipt to point of delivery in the wheeling system. Monthly transmission charges of this path would be payable in proportion to contracted power.

Provides wrong economic signal, based on fictitious path, power flow on parallel path is ignored

P OINT

OF

C ONNECTION

It is the latest transmission charge pricing methodology introduced for sharing of Inter State Transmission Systems (ISTS) charges and Losses among the Designated ISTS Customers (DICs) depending on their location and sensitive to their distances from load centers and generation and the direction of the node in the grid. The need for this method was triggered due to the problems confronted in the application of the present Regional Postage Stamp Method which implied that all the users of a system in a region pay same price/MW of allotted transmission capacity.

C OMPONENTS

OF

P OC

The two major components of PoC tariff are:

Uniform Charges. Zonal Charges.

Uniform Charges are the transmission charges which were earlier present before the introduction of PoC. These include fixed cost recovery and Return on Equity of the investors.

Zonal charges depend upon the nodal congestion at the specified nodes of injection and withdrawl.

U NIFORM C HARGES

Uniform Charge Uniform charge means the charge determined by dividing the Yearly Transmission Charge of the ISTS Licensees by the sum of the Approved Injection and Approved Withdrawal from the grid alternatively referred to as the postage stamp charge.

Yearly Transmission Charges Yearly Transmission Charge (YTC) means the Annual Transmission Charges for existing lines determined by the Commission in accordance with the Terms and Conditions of Tariff Regulations or adopted in the case of tariff based Important Definitions Chapter 1 competitive bidding in accordance with the Transmission License Regulations as specified by the Commission and as in force from time to time and for new lines based on benchmarked capital costs.

C RITERIA FOR Z ONING OF

NODES

Zones shall contain relevant nodes with Costs in the same range

Nodes within zones shall be combined in a manner that they are Geographically and electrically proximate
Nodes with connectivity to Thermal Generators > 1500 MW or Hydro Generators > 500 MW to be taken as separate zones

Demand zones : Sate Control Area

Except NER states which are to taken as one zone.

Zonal Charges : Weighted Average of Nodal Charges

PoC Charges to be computed for 5 blocks of month and peak and other the peak conditions Representative Blocks of Months April to June

July to September
October to November December to February

March
Peak Hours : 8hrs Other the Peak Hours :16 Hrs

P O C C HARGE
PoC Charge (PoC) = m * Uniform Charge (UC) + n *Zonal Charge(ZC)

Where m and n are the constants specified in the regulation which is 0.50 for initial two years. The Uniform Charge component of PoC charge shall be calculated as follows:

UC = Total YTC / (Sum of Approved Injection +Sum of Approved Withdrawal)

M ETHOD FOR HVDC C OST A LLOCATION

Compute Transmission Charges for all load and generators with all HVDC lines in service. Disconnect HVDC line and again compute new transmission charges for all loads and generators Compute difference between nodal charges with or without HVDC.

Identify nodes which benefits with the presence of HVDC

Allocate HVDC line cost to the identified nodes.

C OMPARISON OF DIFFERENT METHODS IN T RANSMISSION P RICING

Postage Stamp Method Positive: Simple to calculate, familiar to most of the utilities,

most widely used in developing market all over the

world Negative : Insensitive to distance & direction.

C OMPARISON OF DIFFERENT METHODS IN T RANSMISSION P RICING

Contract Path Methodology Positive: Sensitive to distance. Negative: Provides wrong economic signal, based on fictitious path, power flow on parallel path is ignored.

C OMPARISON OF DIFFERENT METHODS IN T RANSMISSION P RICING

Distance Based MW-Mile Methodology Positive: Simple, sensitive to distance. Negative: Based on physical distance, not on actual power flow.

C OMPARISON OF DIFFERENT METHODS IN T RANSMISSION P RICING

Point tariff, Nodal Pricing or Locational Marginal Pricing (LMP) Positive: Provides economic signals, suitable for developed / saturated market. Negative: Complex, not suitable for developing market,

losses forms the part of transmission pricing, based on MWh

not on MW.