A Staff Presentation

Developing a Common Platform for Electricity Trading

RAVINDER Chief (Engineering) Central Electricity Regulatory Commission 7th Floor, Core 3, SCOPE COMPLEX, Lodhi Road, New Delhi- 110003, INDIA Ph. 91 11 24364960 E mail: ravinderveeksha@hotmail.com
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All INDIA INSTALLED CAPACITY(MW)

(As on 31.03.06)
RES (Excludes captive ) 5% 6191 MW Thermal 66% 82410 MW

Nuclear 3% 3360 MW

Hydro 26% 32326 MW

TOTAL - 124287 MW

Thermal

Hydro

Nuclear

RES

ALL INDIA INSTALLED CAPACITY (MW) Sector Wise (As on 31-03-2006)

Private 11% 14139 MW

State 57% 70224 MW

Central 32% 39924 MW

TOTAL - 124287 MW
Private Central State

Statutory Provisions Market Development is the responsibility of the

Electricity Regulators (Sec 66, 178 IE Act, 2003).

Sec 174: The ACT is overriding Preventing market domination

is the responsibility of the Regulators (Sec 60, IE Act, 2003). for developing a Power Exchange given to CERC in the National Electricity Policy.
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Mandate

Current Scenario

Most of the supplies are tied up in long term PPAs: Mostly, regulated two-part tariff: Ideal for investment promotion as well as price security for Discoms Short term trading constitutes 2 to 3% of the total supply. Trading essentially between surplus & deficit distribution utilities. Trading is essential for resource optimisation and meeting short term peak demand and for disposing off surpluses which are inevitable as a utility has no direct control over consumer load .
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ALL INDIA POWER SUPPLY SCENARIO

(April, 2005 - March, 2006)
ENERGY 640 632 B U 630 620 610 600
BU

PEAK DEMAND / PEAK MET 94 92 90 88 86 84 82 80 78 82 GW

93 GW

590 580 570 560 550 Requirement Availability 8.3% Deficit

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579 B U

GW

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Peak Met Peak Demand 1 12.3% Deficit

Current Scenario Open

Access Regulations have facilitated power trading in an orderly manner. agreements and transmission clearance have to be arranged separately.

Energy

Open

Access charges are reasonable and simple to apply.

Short-term Trading Volume

Traded Volume in MU
16000

11029
12000 8000

11847

14188

4178
4000 0 FY02 FY03 FY04 FY05 FY 06
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1617

*For FY-07: 15 BU Estimated

Current Scenario Suppliers call for bids from buyers/traders. Traders compete to win the supply bids. Buyers have no option but to buy from
trader having the supply contract.

the

Due to deficit scenario, suppliers dominate. Prices of trades electricity have been going up. Most of the bilateral trading is inter-regional;
ER, NER are suppliers NR, WR are buyers
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Price trend of traded electricity

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Current Scenario

Need to curb sellers domination

Need to put on end to profiteering

Need to organize short term trading on a transparent, equitable and efficient platform

Need to increase the supplies

Need to bring surplus captive generation into the grid. Need to encourage peaking power plants and merchant generation. For optimum resource management, need to simultaneously clear energy contracts & transmission 11 paths.

Current Scenario

Adequate

Inter-state transmission system, but needs strengthening

and

Established scheduling, dispatch

energy accounting procedures

UI

accounting system for real time deviations from schedules

Established RLDCs, SLDCs

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Market Structure Prior to Electricity Act, 2003 (Bundled)

CGS
IPP

SEB
Generation + Transmission + Distribution Govt Consent

Consumer
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Market Structure after Electricity Act, 2003

CGS

STATE GENCO

IPP

Trader

Discom
Consumer
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Road map for market development

Forward Physical Contracts (Long-term)-

Established; Moving from Regulated Cost-Plus PPAs to Tariff-bid based PPAs for new generating capacity Forward Physical Contracts (Short-term)Established; but non-standard contracts Day ahead Spot Market thru PX? Real Time Market (Substituted by UI mechanism)
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International Experience
Nord Pool PJM UK experience

California PX
South Africa/ ESKOM

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Appropriate PX design for India

National power exchange Vs many power

exchanges Mandatory Vs Voluntary participation Double side bidding Vs Supply side bidding Uniform pricing Vs Discriminatory pricing Day-ahead exchange Vs Same day exchange Time block for bidding (hourly/half-hourly etc) Congestion management Taking care of operational inflexibilities of generating stations

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2,4,5

3,6,7

NLDC/RLDC

Day ahead PX
1, 6

Clearing House
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B: Bidders SB: Settlement Bank A/C: Pledged Account & Collaterals of Clearing House Members in SB

SB
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SB
9

SB
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A/C A/C A/C

1- Bidders send their bids to PX. 2- NLDC informs transmission capacity to PX. 3-. Clearing House confirms adequate collaterals of clearing agents. 4- PX obtains NLDC concurrence before releasing day ahead Trade schedules. 5 - RLDCs issues day ahead generation & dispatch schedules for PX participants. 6 - PX issues day ahead trade schedules. 7 - PX issues rolling collateral requirement. 8 - After settlement period Clearing House issues Invoice/Credit Notes . 9- Settlement Banks debit/credit the appropriate amounts.

Function Diagram

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Expectations of a Portfolio Manager

Freedom to sell and buy at short notice

through a single window No cap at sellers bids Reasonable cost of purchase Assured availability Assured delivery/take off Assured payments
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Transmission and System Operation

Open Access charges for PX schedules would be

socialized.

Transmission
for PX.

losses to be applied on PX participants as applicable.

Part inter- regional capacities would be assigned

RLDC time line and IEGC would be complied. PX schedules would be firm.
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PX - Organisation
Chairman
Governing Council Advisory Council

CEO

Executive Board

Operations

Settlement & Clearing

Information & Technology

Market Monitoring
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Issues- General
Does Px need Licence

Membership to Grid connected entities only

Whether to allow membership to traders Px- to be a profit or non profit organisation Role of CERC

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Issues- General
Do we really need a Day-ahead PX,

now or in the near future? What would be the right time? How to mandate a national PX by law? How to organize a national PX?

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Issues- Price Discovery and Bidding

Pricing principles

Bid caps, to have them or not

Can bid caps be effective

Sale price in constrained Market

Can we curb market power/abuse How can Run of River, Thermal,

Nuclear and Windmill Generators submit hourly day-ahead bids?

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Issues- Preventing Market Abuse

Common market abuses 1. Bidding above the marginal cost 2. Withholding Capacity 3. Avoiding a platform with lower price caps What would it feel like if most often the

marginal bids for Market Clearing Price were of liquid fuel generators?

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Issues- Market Regulation

Defining the Rules of the Game

Enforcing the Rules and Regulations

Market Monitoring

Ensuring Anonymity of Bids

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Issues- Congestion Management

To collect congestion revenue

Or Not by charging the Buyers of congested zone at the cost of PX purchase instead of the price offered by the Buyers?

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THANK YOU

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