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-dDscriminatory 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.

COMPUTATION OF POC CHARGES

Average YTC per circuit km (for each voltage level & conductor configuration) shall be used for computation of charges.
PoC Charges to be computed for 5 blocks of month for peak and other the peak conditions

Representative Blocks of Months

April to June July to September October to November December to February March

COMPUTATION OF POC CHARGES

Average YTC to be apportioned to peak and other than peak based on the no. of hours constituting these periods. 50% recovery through Hybrid Methodology and 50% through Uniform Charge Sharing Mechanism(for first two years ). Loss Allocation Factor to be computed for each season using Hybrid Methodology

50% losses through Hybrid Method and 50% through Uniform Loss Allocation Mechanism(for first two years)

COMPUTATION OF POC CHARGES

Criteria for Zoning of nodes:

Costs within the same range Geographically and electrically proximate Nodes with connectivity to Thermal Generators > 1500 MW or Hydro Generators > 500 MW to be taken as separate zone. Except NER states where entire region is to be taken as one zone.

Zonal Charges : Weighted Average of Nodal Charges

COMPUTATION OF POC CHARGES

Generating stations connected to ISTS network < 400KV would be charged at zonal charges where physically located
No transmission charges/losses for solar projects (for the entire useful life) commissioned within next 3 years.

In the event of a Designated ISTS Customer failing to provide its requisition for demand or injection for an Application Period, the last demand or injection forecast supplied by the DIC and as adjusted by the Implementing Agency for Load Flow Analysis shall be deemed to be Approved Withdrawal or Approved Injection

SPECIFIC CHARGES

For deviation > 20% in any time block, the DIC shall be required to pay transmission charges for excess generation @ 25% above the zonal POC charges determined for zone where the Designated ISTS Customer is physically located

Payment on account of additional charges for deviation by the generator shall not be charged to its long term customer and shall be payable by the generator

I NDIRECT 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

[Benefit = (old cost i.e. base case with injection) minus (new usage cost i.e. with link disconnected)]

In case benefit is ve, same to be collared to zero Allocate HVDC line cost to the identified nodes.

C OMPARISON OF DIFFERENT METHODS IN T RANSMISSION P RICING

Postage Stamp Method Positive: Simple, familiar, most widely used in developing market Negative : Insensitive to distance & direction

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.

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.