POWER TRADING

Presentation Coverage

Concept of Electricity Trading Licensing and Trading Provisions Open Access ,Processes & Procedures Power Trading Commercial Aspects

Concept of Electricity Trading

Goods Service Continuum

Soft drinks Salt Soap Automo biles
Cosmetics Fast food outlets

Tangible dominant Adv. Agency Fast food outlets Consulting Teaching

Intangible dominant

Electricity

Features of Electricity as a Product

Electricity is not Visible It can not be touched It cannot be stored It can not be patented Precise standardization is not possible Transfer of ownership is not possible Production & Consumption of electricity inseparable Consumer is Part of the Production Process

What is Trading As per Electricity Act 2003-------Purchase of Electricity for Resale

Power trading is notional : Buyer to pay the agreed amount to the supplier for scheduled quantum of power. Payment for variations from the schedule through a common mechanism, e.g. U.I.

10MW A @ 200 p/kWh

TRADER

10MW @ 220p/kWh B

AGREEMENTS

A 8MW

ACTUAL FLOW 12 MW

GRID

200 p/kWh for 10 MW

TRADER

220 p/kWh for 10 MW

PAYMENTS FOR SCHEDULED QUANTUM A B

UI for 2 MW

SETTLEMENT FOR DEVIATED QUANTUM

UI POOL A/C RLDC

UI for 2 MW

Volume of Electricity Traded / Generated in India

FY 03 -04 Electricity Traded ( BU ) Electricity Gen ( BU ) % of Trading to Total Gen. 11.03 FY 04 -05 11.90 FY 05 - 06 14.19 FY 06 - 07 15.02 FY 07-08 20.96 FY 08 - 09 24.21 FY 09 - 10 40.87

519.4

548.0

578.8

666

704.0

723.0

764.02

2.12

2.16

2.45

2.41

3.15

3.35

5.35

Important Aspects of Trading

Price Determination Payment Security Mechanism Penalty Provision for defaults Profit Margin Energy Accounting

Product Differenciation
Night Power Morning Peak Off Peak Evening Peak : 2200 Hrs to 0600 Hrs ( 08 Hrs ) : 0600 Hrs to 1100 hrs (05 Hrs) : 1100 Hrs to 1700 hrs (06 Hrs) : 1700 Hrs to 2200 hrs (05 Hrs)

Round the Clock : 0000 to 2400 Hrs ( 24 Hrs)

Electricity Pricing
Night Power Morning Peak Off Peak Evening Peak : 2200 Hrs to 0600 Hrs ( 08 Hrs ) @ 195 P / Unit : 0600 Hrs to 1100 hrs (05 Hrs) @ 235 P / Unit : 1100 Hrs to 1700 hrs (06 Hrs) @ 225 P / Unit : 1700 Hrs to 2200 hrs (05 Hrs) @ 321 P / Unit @ 265 P / Unit

Round the Clock : 0000 to 2400 Hrs ( 24 Hrs)

Name

Hr

Rate(P/Unit)

Composite Rate(P/Unit)

NP MPK OPK EPK RTC

8 6 6 5 24

200 250 235 321 255

1600 1500 1410 1605

Unscheduled Inter-Change (UI)

The mismatch between the scheduled and actual drawl at drawl points & scheduled and the actual injection at injection points shall be met from Grid and shall be governed by UI pricing mechanism applicable to the inter-state transactions.

P
570

UI Rate Chart

435 345

210 150

0 49

49.3

49.6

49.8

50

50.5

Hz

.8 Hz = 360 P .1 Hz = 45 P .02 Hz = 09 P

.7 Hz = 210 P .1 Hz = 30 P .02 Hz = 06 P

UI Injection point

UI Drawal Point

GRID

In Case Of Generating Stations INSTALLED CAPACITY DECLARED CAPACITY (DC) = 2000 MW = 1900 MW

SCHEDULED GENERATION (SG) = 1900 MW ACTUAL GENERATION (AG) = 1890 MW

UI = (AG SG) = (1890 1900 ) = - 10 MW Generating Station to pay for 10 MW

In case of SEBs
DRAWAL SCHEDULE SCHEDULE BY RLDC

= 700 MW = 700 MW = 750 MW

ACTUAL DRAWAL

BY SEB

UI = (750 700) = 50 MW

SEB to Pay for 50 MW

Licensing and Trading Provisions

Licensing & Trading Provisions

CERC brought out regulations for Procedure, Terms & Conditions for grant of Trading Licence and other related matters Regulations, on 30th January, 2004 vide Notification Dated 6th February,2004.

TRADING PROVISIONS
Electricity Act 2003 10th June, 2003
Trading distinct activity permitted with licensing. (Section 12) Regulatory Commission may fix ceiling on trading margin to avoid artificial price volatility. (Sections 79 (2) (b) & 86 (2) (b)) The Regulatory Commission to promote development of market including trading. (Section 66)

Advantages of Power Trading

Optimal utilisation of existing resources in power sector Shortages in the deficit locations are minimised Could help in deferring investment for additional generation capacity Reduction in average cost of power to some extent Scheduled exchange will increase and un-scheduled exchange will reduce bringing in grid discipline Better grid discipline will improve quality of power in terms of frequency excursion and voltage

Complexity in Power Trading

Resolution of Scheduling with RLDC needs vigorous monitoring. Frequent mis-match in Regional Energy Accounts Transmission congestion in Inter-Regional Exchanges a) Demand is sensitive to political environment b)Parties not willing to enter into agreements with provision of penalty in case of default Open Access frame work is yet to be finalized by SERCs in the states.

Technical and Financial Requirements

Full time professional of one each in

1. Power system operations and Commercial

aspects of power transfer, 2. Finance, Commerce and accounts

Procedure for grant of Trading Licence

The form of application for licence shall be specified by the Appropriate Commission

Notices shall be published in the newspapers within 7 days of making the application to the Commission

The Commission would examine the application with regard to the technical requirement, capital adequacy and credit-worthiness in accordance with Section 52 of the Act.

Procedure for grant of Trading Licence

The Commission when it decides to grant the licence shall publish its intent for grant of such licence in two newspapers and await objections, if any, for a period of two weeks. Objections received, if any, shall be handled.

Licence when granted shall have a term of 25 years

Functions of CERC
Section 79 (1) Says The Central Commission shall discharge the following functions To issue Licence to persons to function as transmission licensees & electricity traders with respect to inter-state operations. To fix the trading margin in the inter-State trading of electricity, if considered necessary. To specify Grid code and enforce standards with respect to quality,continuity and reliability of service. To adjudicate upon disputes.

Functions of SERC
Section 86 (1) Says The State Commission shall discharge the following functions : To issue Licence to persons seeking to act as transmission licensees,distribution licensees & electricity traders with respect to their operations within the State To fix the trading margin for intra-State trading of electricity,if considered, necessary To adjudicate upon disputes

Need of Licence for Trading

Section 12 Says No person shall Transmit Electricity or Distribute Electricity or Undertake Trading in Electricity Unless he is authorised to do so by a Licence issued under Section14

Issue of Trading Licence

Section 14 Says The Appropriate Commission may, on application made to it under sec-15 grant any licence to any person To undertake trading in Electricity as an Electricity trader,in any area which may be specified in the Licence

Category of Licence

S.No

Category Energy Traded / of Licence Annum (MU)

Net Worth ( Rs. in Crores )

Fees ( Rs. in Lakhs )

1 2 3 4 5 6

A B C D E F

Upto 100 100 to 200 200 to 500 500 to 700 700 to 1000 > 1000

1.50 3.00 7.50 10.00 15.00 20.00

1.00 2.00 5.00 7.00 10.00 15.00

InterInter -state Traders

NTPC Vidyut Vyapar Nigam PTC India Tata Power Trading Company Reliance Energy Trading Pvt. Ltd. Adani Exports Ltd. MMTC Ltd. Lanco Electric Utility Co Sumex Organics Pvt. Ltd. DLF Power Limited Jindal Steel & Power Ltd Chhattisgarh Electricity Company Ltd. GMR Thapar Subhas Kabini Power Category F Category F Category F Category A Category F Category C Category A Category B Category C Category A Category A Category A Category A Category A

Top 5 Suppliers in FY - 04 SL 1 2 3 4 5 Supplier WBPDCL GRIDCO Chukha HPC DVC DTL Energy Sold(MU) 2954 1966 1495 1273 762

Top 5 Suppliers in FY - 05 SL 1 2 3 4 5 Supplier Energy Sold(MU) GRIDCO 4661 WBPDCL 3177 DVC 760 APTRANSCO 384 Sikkim 270

Top 5 Buyers in FY - 04 SL 1 2 3 4 5 Buyer MSEB MPSEB DTL GEB KPTCL Energy Bought(MU) 1837 1525 1282 1011 822

Top 5 Buyers in FY - 05 SL 1 2 3 4 5 Buyer MSEB PSEB MPSEB HVPNL GEB Energy Bought(MU) 2833 1453 1387 1211 864

Trading Share of Traders SL 1 2 3 4 Trader PTC NVVN ADANI TATA FY-04 (MU) 11029 962 Nil Nil FY-05 (MU) 8887 2687 735 103

Inter-Regional Sale in FY - 05 Buyer Region (MU) Seller Region North West South East North 21 West 149 82 South 325 6 46 211 East 3348 4690 365 185 NE 455 18 227 0 Total 3724 5619 576 209

NE

Total

21
231 588 8722 719 10281

134 19 153

Who Cannot Trade

CENTRAL TRANSMISSION UTILITY ( SEC 38 )

STATE TRANSMISSION UTILITY ( SEC 39 )

Asset Backed Trading

Trading Company
NVVN Reliance ETL TPTC PTC

Parent Company
NTPC REL TATA POWER PTC

Parent Companys Gen.Asset Existing Proposed

23450 MW 1700 MW 2277 NIL 12% IN LANCO& ONGC Tripura 11558 MW upto 2012 8300 MW

Ispat Energy Ltd Ispat Industries Ltd Lanco Elec.Utility Ltd Lanco Group

354 509 Plans to become 1000 MW by 2007

Asset Backed Trading by NVVN Un-requisitioned Surplus (URS)

NVVN Traded 60 MU ---- FY - 04 NVVN Traded 26 MU ---- FY - 05

Blending of Power
(Cheap power +Costly power) Mixed & sold to Customer as blended power

Trading of NTPC power

Open Access Reservations Procedure

OPEN ACCESS ELECTRICITY ACT, 2003

Section 40 of Electricity Act 2003 states that the transmission licensee shall provide non-discriminatory open access for the use of its transmission system by any generating company, licensee or consumer in accordance with the regulations specified by the Appropriate Commission.

What is Wheeling
Means the operation whereby the distribution system and associated facilities of a transmission licensee or distribution licensee are used by another person for the conveyance of electricity on payment of charges

DEFINITION OF OPEN ACCESS

Enabling of non-discriminatory sale/ purchase of electric power/energy between two parties utilizing the system of an in- between (third party), and not blocking it on unreasonable grounds

Nodal Agency
Nodal Agency for LT customer shall be CTU in whose system the point of drawl of electricity is situated. Nodal Agency for the ST customer shall be RLDC of the region where the point of drawl of electricity is situated.
LT -Long Term and ST- Short Term-may be

Process of Power Trading

Schematic of Power Trading

System Operator

Surplus Utility

Trader

Deficit Utility

Transmission Utility
Contract Power Flow P Payment Flow

Power Trading Process Map

Data Analysis by NVVN to decide to Buy or Sell Acceptance of offer Decide Route for power flow & Delivery point PPA with Buyer & Seller Apply for Open Access by NVVN to Nodal RR Approval of Open Access by Nodal RLDC

Acceptance of Open Access by NVVN Request for Schdule to Nodal RLDC Power Flow & Metering Bill by NVVN to Buyer & Seller Realisation of payments Closing of Contract

Regional Losses POI POD POD NER (4.29%) NR (3%) ER (LOSS=3.1%)

POD = Point of Delivery POI = Point of Injection POD = Point of Drawal

WR (5%)

SR (4%)

Commercial Issues

Trading is uncertain & risky but Profitable Payment Security Mechanism

Fixation of Trading Margin

Payment Security Mechanism

Letter of Credit to be Opened by Buyer for Trader (An amount equal to 18 days of Average Billing) Letter of Credit to be Opened by Trader for Seller (An amount equal to 14days of Average Billing) Letter of Credit to be Opened by Trader for RLDC

Thank you