PowerExchanges Products

December 23, 2011

Agenda

Power Exchanges
Participation Rules R l

Congestion g Management g

PowerExchanges

Exchanges Definition
Exchanges
Any organization, association orgroupwhichprovidesormaintainsamarketplace where securities, options, futures,or commodities canbetraded;orthe marketplaceitself.

PowerExchanges
Anentityprovidingacompetitivemarketforelectricpowerthroughday and/or houraheadauctionofgenerationanddemandbids.

InIndiancontext
PowerExchangesarethoseentitiesregisteredunderCERC(PowerMarket) Regulations 2010toensurefair, Regulations, fair neutral, neutral efficientandrobustmarketbyproviding standardizedcontractsandquickpricedissemination

PowerMarketDevelopment

DevelopmentofIndianpowermarkethasbeenastructuredprocess Startingofwithlongterm,mediumtermandshortterm,Indianpower marketisnowmoving gclosetotherealtimemarket

3revisionseeninUnscheduledInterchangeRate 3timesthefrequencybandhasbeentightened

Introductionofpowerexchangesisamajorstepseenfurtheringthe d l development of fpowermarket k

DevelopmentbeinghamperedbyskewedorunplannedImplementationofOpenAccess regime Congestionmanagementunfaironbothbuyerandseller congestionfundcanbebifurcatedbetweenbuyerandsellerat Congestionfundisnotbeingutilized Noexpenditureoncapacityadditionasplanned

Proper p congestion g management g wouldbecriticalfordevelopment p

Environmentalproductshasbeenintroducedwideningthemarket

PXsdemonstrateaNationalMarketispossible

PXs leading the initiative for setting up of a formal National level market place DayAhead Spot Market functioning smoothly and growing in participation N ti Nationwide id participation ti i ti from f
Government Utilities, Private Sector, Captives, IPPs Large Consumers beginning to come into the market

Special S i l Tariff T iff rules l to t accommodate d t nationwide ti id anonymous usage of f transmission t i i Point of Connection transmission pricing regime shall further boost market development T Term Ah d Market Ahead M k t
Aphysicaldeliverybasedmarket,substantiallydifferentfromproductsofferedbyPXs worldwide ProductsdesignedspecificallyforIndianmarkettomanagebothQuantity&Pricerisk

Market slow to respond to delivery based weekly contracts

TradinginPX

MarketParticipants
PowerProducer Transmission Utilities SystemOperator LoadDispatch Centers Distribution Utilities P Power Traders T d / PowerExchanges RegulatoryBodies GeneratePower&Sellinbulk(longtermarrangements) PublicandPrivatesector ownersoperatingoncompletivenorms Developandmaintaintransmissionnetworks Ownersat central&statelevelenjoynaturalmonopoly Operatetransmissionnetwork& Regulateflowoftheelectricity NodalLoadDesptachCentersmanagedemandsupply Providelastmileconnectivitytotheendconsumers, StateElectricityBoards,public andprivateentities&franchisees Exchanges E h provide id transparent market k toparticipants i i totrade d Tradersactingasintermediately Regulatorycommissionsatcentreandstatelevelsetmarketpractices &policies, overseeinteractionamongparticipants

Trading Eligibility

Grid Connectivity NOC from respective Load Despatch Center in prescribed format

Installation of special Energy meter equipments as directed by Load Desptach Center

Exchange Membership direct/indirect

Trading How

Enablement of Clients and Members Margin g Provision by y Members Bid collection (During Auction Hours) Matching Clearing
Obligation generation

Settlement
Payin (Delivery Day) Payout (Delivery + 1 Day)

TradingSystem
Members
Matched Trades

Matching Engine g

Payment

PXIL Trading Admin

Application Congestion C i Approval

Nodal RLDC

Banks/ PCM PCMs

Final Pay In And Pay y Out

Clearing and Settlement System

9Deposits and Collaterals Available for Margins 9Final Obligation including Penalty

CongestionManagement

WhyCongestion
LongTerm 12 25years specificsellerandbuyerset Pricingbasedoncostofassetandsocialized overallbeneficiaries

HIGH

MediumTerm 3 monthsto3years

specificsellerandbuyerset Pricingbasedoncostofassetandsocialized overallbeneficiaries

ShortTerm Up to3months

specificsellerandbuyerset Pricingarrivedatasapercentageoflongterm transmissionpricing Earningsusedtoreducecostofassetforlong termconsumers

Transm missionacce esspriority

Accessonbasisoftermof networkusage Impropercongestions management,eliminate l the h opportunitiesformore efficientelectricitytrading.

DayAheadSpot Market Forthe nextdayonly

AccessfortradesthroughPowerExchanges Collectivetransactions PricingbasedonPointofConnectiontariff

LOW

ContractStructurereflects transmissionpriorityaccess resultingincongestion

TransmissionCongestionManagement
CounterTrading
S System t O Operator t trades t d poweragainsttheflow toensurefeasible despatch.

Redespatching
S System t O Operator t managessupplyand/or demandtoensurethat actualflowcomesbelow thetransfercapability

MarketSplitting
M Market k tsplit litinto i t deficit d fi it andsurplusmarketswith flowontheintervening corridorrestrictedto thatallowedbySystem Operator

TransmissionCongestionhandledbywayofMarketSplittinginIndia

Results R l i inprice i differential diff i lacrossmarkets k EverydaycongestionfundiscollectedbypowerexchangesanddepositedtoNLDC congestion managementfund

MarketonlyaffectstheoperationsofPowerExchanges Powerexchangeoperationsaffectedthemostbypresentcongestion managementtechnique

MarketSplitting

Bidsfrommarketparticipantsarereferredtothevariousbidzones,sothatthePower Exchangescanaggregatethesupplyanddemandcurvesforeachbidzone. Inaninitialiteration,allsupplyanddemandacrossallzonesisaggregated,andan unconstrainedmarketclearingprice(UMCP)isfound. Thealgorithmfurthermorecalculatestheclearedunconstrainedschedulesforallmarket participantsbasedontheUMCP. Thereafter,boththeexchangessubmittheunconstrainedsolutiontotheNationalLoad Despatch Centre(NLDC).NLDC notifiesthemaximumtradingcapacityacrossallbidareas ona24hourbasisonproratabetweentheexchanges.

MarketSplitting

ThistradingcapacitywillbelimitedtoATC discountedbythesumofalreadyapprovedLTOA andSTOA. Inthenextiteration, ,thesupply/demand pp y/ balancewithineachzoneisaggregated, gg g ,andany yzonal imbalancethenrepresentstheamountoftransmissionfrom/tothatzone. Ifthiscalculatedtransmissionamountexceedsthepermittedtransmissioncapacity,thenthere istransmissioncongestion g andthemarketsplitting p g algorithm g isinitiated. InMarketSplitting,thecongestedzonewillbeseparatedfromtherestofthesystem,andthe pricewithinthezonewillbeadjustedtodrivethesupply/demandimbalancetoalevel to matchthetransmissioncapacity. ThepriceforthesurplusareawillbelessthantheUMCP,whereasthepriceforthedeficitarea willbemorethanUMCP. Thiswillresultinasurplusfund fund,knownascongestionrevenuefund fund,duetotheaboveprice differentialandwillbeequaltoareapricedifferenceXusedcapacity

Congestion Management

CalculateunconstrainedMCPforwholemarket Identifytransmissionbottlenecks Identifysurplusarea(s)anddeficitarea(s) Increasepriceindeficitarea

Increasesupply decreasedemand

Decreasepriceinsurplusarea
Decreasesupply increasedemand

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