Conference by Independent Power Producers Association of India

1. Conference by Independent Power Producers Association of India ‘Power Pools in the Emerging Market: Trading Hydro and Captive Surpluses” 29th June 2004 New Delhi ALOK ROY General Manager, NRLDC POWERGRID

2. Stranded generation ? Report of the ‘Task Force on Investment and Reforms’ estimates installed capacity of captive to be in excess of 27,500 MW as of 2001. Need for identifying which of these is actually ‘stranded’. Power from Internal Combustion based Diesel Generation Sets may not be viable for inter-state trading.

3. Inter-state trading - a perspective In FY 2003-04, PTC’s trading volume was just 1.84% of the country’s regional energy consumption (excluding trading against Malana, Chukha and Kurichu hydro projects). These hydro projects contributed 18.5% to PTC’s trading volume of 11029 MUs. In May 2004, after inter-state open access was implemented, the total inter-state contracted power (not necessarily scheduled) through trading in Northern Region was 3.03% of the regional consumption.

4. Inter-state trading-a perspective(contd/-) Considering the diversity of loads across states and regions and the network capability, the scope for inter-state trading is limited. Identifying viable captive generation would provide a major fillip to trading. However a major boost to trading will occur only after Availability Based Tariff (ABT) is implemented at intra-state level and open access allowed in distribution by SERCs.

5. Inter-state trading-a perspective(contd/-) Captive generators would be generally embedded in the state system. Obviously, these captive generators cannot become a partner in the regional level scheduling and Unscheduled Interchange (UI) Pool Account as it would become totally unmanageable. Intra-state ABT with payment security mechanism for UI is a must.

6. Pan-caking of open access charges ? Since inter-state open access has been implemented in the country with effect from 6th May 2004, NRLDC has handled more than 75 applications to date. How thick is the open access pancake?

7. TOTAL COST FOR SHORT-TERM TRANSMISSION TRANSACTIONS APPROVED BY NRLDC IN MAY 2004 1.27% energy 0.05% energy 20 to 40 paise/kWhr more than 40 paise/kWhr 13.93% energy 15 to 20 paise/kWhr 17.46% energy 10 to 15 paise/kwhr 66.70% energy less than 5 paise/kWhr 0.58% energy 5 to 10 paise/kWhr TOTAL MWHr RESERVED = 417671.4 The above cost includes the transmission charges, scheduling charges, 2 % handling charges and non-refundable processing fees

8. Break-up of open access cost Nodal RLDC charges : 0.38 paise/kwh Other RLDC charges : 0.14 paise/kwh CTU charges : 6.59 paise/kwh Total : 7.11 paise/kwh Since 75% of CTU charges are ultimately refunded to long term customers, the incremental increase is only 2.15 paise/kwh. This is much less than the current level of trading margins.

9. Transmission constraint ? If network constraints do not permit short-term inter-state transactions, can it be called a transmission constraint ? No ! Transmission constraint term is a misnomer. The network has simply not been planned for any random short-term transaction. It has been planned for a certain Central Sector generation with related security criteria.

10. Transmission constraint The other questions are : ‘Can we over-design our transmission network to accommodate all possible short-term transactions ?’ Who pays the cost for such a vast network ? Is it worthwhile considering the small quantum of short-term inter state trading involved? Are we crying ourselves hoarse over a non-issue?

11. Thank you