COMMERCIAL ASPECTS OF POWER GENERATION

2. 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 charge
b) Energy charge including FPA (schedule based)
c) Unscheduled Interchange charge

3. 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.)

4. 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, and
AUXn = Normative Auxiliary Energy Consumption as a
percentage of gross generation

5. COMPONENTS OF A.B.T
 CAPACITY CHARGES
 ENERGY CHARGES
 UNSCHEDULED INTERCHANGES
 INCENTIVE

6. 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).

7. 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

8. 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

9. Interest on Loan

10. 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%).

11. O&M COST

12. Fuel cost component of working capital
Receivable component of working capital

13. 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.

14. •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:

15. 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.)

16. 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

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. (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.

24. 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.

25. 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.

26. Operation Norms for Faridabad
Target Availability for full fixed cost recovery 80 %
Target PLF for Incentive 80 %
Gross station Heat Rate CC 2000Kcal/Kwh
OC 2900Kcal/Kwh
Aux Power Consn. (APC) CC 3 %
OC 1%

27. 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 tariff
F.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

28. 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

29. 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.

30. 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

31. 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.

32. Example of UI Optimization Scheme