Workshop on Open Access in Maharashtra Nagpur 14

Workshop on Open Access in Maharashtra Nagpur 14 th May 2016 For Public Use

In this presentation Introduction to Indian Power Market Product Portfolio Trading Mechanism Market snapshot Participation Trade @ IEX Volume Price

Industries’ Options For Power Procurement Discom • Regulated Tariff approved by Respective SERCs (Existing) Medium Term Short Term (OTC) Exchange (most preferred) Self Generation • 3 Month- 3 Years • Tariff covers : Fixed Cost + Variable Cost+ Mark Up ( < long term) • Intraday- 3 Months to be procured through competitive bidding only • Single tariff covering Tariff covers Fixed Cost+ • Highly liquid and transparent marketplace • More accurate load management through Day Ahead Market • Costly fuel / less efficient units • Much higher costs 3

Company Snapshot 96% Market Share ~100, 000 MWh average daily trade 3800+ Participants 3300+ Industries Transparency Liquidity Competition

IEX Market Segments Delivery-based Contracts Day-Ahead Market Closed , Double-sided Auction 10 -12 am bidding Each 15 -min block , 0. 1 MW min NOC required Term-Ahead Market since Sep, 09 Day-Ahead Contingency – Another window for Day-Ahead. Extended Market: Trading window increased to 1500 -2300 Hours since June, 08 Extended Markets introduced 20 th July’ 15 - Intra-Day Extended Market: Trading window increased to 0030 – 2000 Hrs for same day delivery, with delivery starting at 0400 Hours Daily- for rolling seven days (delivery starting after 4 days) Weekly- for 1 week (Monday-Sunday) Renewable Energy Certificates since Feb, 11 Green Attributes as Certificates Sellers : RE generators not under feed in tariffs Buyers: Obligated entities 1 MWh equivalent to 1 REC Next… Energy Saving Certificates Auction Continuous

Features of Day Ahead Market A closed double-sided anonymous auction for each 15 -min time block for the following day N 1 N 3 The intersection between the aggregated sale and purchase curves defines the market clearing price (MCP) A 2 N 2 E 1 W 3 W 2 E 2 12 Bid area defined S 1 Congestion Management through market splitting and determining Area Clearing Price (ACP) specific to an Orders area or Block Orders Bid types: Portfolio Minimum bid=Re. 1 for 0. 1 MWh Minimum Price & Volume Step = 0. 1 p * 0. 1 MWh S 2 12 Bid Areas A 1

DAM trading process Bidding Matchin g 10: 00 am to 12: 00 pm to 1: 00 pm Bids for 15 min each or block bids can be placed MCP &MCV calculated Review corridor and funds availability 1: 00 pm to 2: 00 pm Corridor availability and funds verified Schedulin g Result Confirmati on 3: 00 pm 5: 30 pm 6: 00 pm Final ACV and ACP calculated. Market splitting if congestion Collective transaction confirmation by NLDC Final Schedule sent to RLDC for incorporation

Bid Types • Bids for each 15 min can be entered • Varying price and quantum pairs • Allow partial execution Single/Portfolio Bid • Relational Block Bid for any 15 min • Mother or child bid • No circular links • No partial execution Block Bid

Matching: Model Price Calculation algorithm (Example for a sample 15 -min) Price Tick Portfolio A Portfolio B Portfolio C 0 20 60 70 1. 1 20 60 70 2. 1 20 50 70 2. 5 20 40 60 3 20 40 50 3. 1 10 40 50 3. 5 7 40 50 3. 8 4 40 50 4 0 40 50 4. 1 0 40 50 5 0 20 50 7 0 20 10 9 0 20 10 12 0 20 10 14 0 20 10 17 0 20 10 19 0 20 10 Portfolio D 40 Portfolio E 0 Portfolio F 0 20 0 0 0 0 -40 0 0 -60 -40 -20 -80 -50 -20 -81 -50 -20 -85 -50 -20 -100 -50 -20 -120 -120 -120 90 70 30 30 -250 -250 -60 -20 -60 -30 Total Buy, MW 190 170 150 140 120 110 100 97 94 90 Total Sell, MW 0 0 -40 -120 -151 -155 -170 -200 -210 Net Transaction, MW 190 170 150 20 100 0 -40 -51 -58 Demand (Buy) 18 -76 -90 -40 -90 -40 -110 -120 -180 -220 -220 Supply (Sell) 16 14 12 10 8 6 MCP: Rs 2. 5 4 2 0 0 50 100 MCV: 120 MW 150 200 250 300

Treatment of Losses… for buyer • POC Loss: 1. 5 % • S 1 (State) loss: 4. 85 % • Buyer X bids for 100 MW at its respective regional periphery Scheduled Drawal <= SLDC Clearance Bid Volume POC 100 MW at NR periphery Loss 1. 5% X State 98. 5 MW at State periphery Loss 4. 85% 93. 72 MW at Buyer End (Buyer) Maximum Bid= Volume in standing clearance + Regional & State losses

Market Snapshot Participation Volume Prices

Key statistics: Electricity & REC Market ELECTRICITY REC 96% 51% 29 States I 5 UTs 16 States I 5 UTs Generators 311 782 Industrial Consumers 3421 1793 >90, 000 MWh >3 million RECs Market Share (FY 14 -15) State Utilities Average Daily Volume Highest : 136, 913 MWh IEX Data as on 31 March, 2016 Highest: 4, 23, 731 RECs

Volume DAM Cleared Volume v/s MCP

High Liquidity in Volume at IEX (Average Hourly Volume in MW) Average Hourly Volume (MW) 7, 000 Purchase Bid Sell Bid Cleared Volume 5, 741 6, 000 5, 000 4, 942 4, 689 4, 920 3, 956 3, 889 2, 850 3, 000 2, 371 2, 000 - 4, 737 4, 456 4, 000 1, 000 6, 451 299 2, 546 1, 919 1, 334 850 529 3, 302 1, 347 3, 212 2, 554 1, 575 678 885 704 * 9 0 1 2 3 4 5 6 6 -17 08 -0 09 -1 10 -1 11 -1 12 -1 13 -1 14 -1 15 -1 1 0 0 0 0 0 2 2 2 2 FY FY FY 2 *Data up to 13 May 2016 543

Average Area Prices in DAM at IEX Area DAM Prices (RTC) 7. 00 Average Price (INR/k. Wh) 6. 00 5. 00 4. 28 3. 77 4. 00 3. 00 2. 77 2. 45 2. 72 2. 00 1. 00 0. 00 North S 1 S 2 Region Rest of India (WR/NER/ER) MCP 12 Bid Areas With commissioning of transmission Lines, market splitting observed majorly in two regions

Participation Increasing Participation

Participation at IEX 0 402 6 273 216 398 6 8 3 79 1 4 5 1 25 22 33 6 0 48 0 7 23 59 672 57 9 16 1 7 0 1 15 0 1 2 0 1 38 Consumer: 3421 761 11 0 2 Generator: 311 0

Industrial segments with IEX Cotton 1% Paper Others 3% 9% Cement 4% Auto Components 6% Textile 29% Chemical 9% Manufacturer 15% Metal 24%

Monthly Price Trend (WR) WR Average Price (Rs/k. Wh) MCP 2. 46 4 2. 73 3. 68 Average Price (Rs. /k. Wh) 4 3 2. 68 2. 62 2. 56 2. 74 2. 82 3. 42 2. 89 3 2. 47 2 3. 03 2. 25 2. 18 2. 20 May'15 Jun'15 Jul'15 2. 67 2. 54 2. 39 2. 56 2. 45 2. 52 2. 24 2. 61 2. 30 2. 40 2. 11 2 1 1 0 Apr'15 Aug'15 Sep'15 Oct'15 Nov'15 Dec'15 Jan'16 19 Feb'16 Mar'16

Open Access: What a consumer pays Charges Po. C charges • Inter-State Transmission charges payable by the open access consumer Transmission Charges or STU Charges • Payable to the state transmission utility for the use of the transmission system for availing power through open access. Wheeling charges • Charge to the Discom for conveyance of electricity through open access as determined by the SERCs Cross Subsidy Surcharge • Subsidising open access consumer has to pay a cross subsidy surcharge to the Discom. Others • Additional Charges, if any • NLDC application fee, scheduling and operating charges, SLDC Charges • IEX transaction charges/Trading Margin

Open Access: What a consumer pays Losses • An open access consumer has to bear in kind the following losses as defined by the relevant regulations Point of connection (Po. C) loss • Inter-State transmission system loss Transmission loss or state loss • Consumer to absorb apportioned energy losses in the transmission system as per the relevant regulations Wheeling loss • Technical losses in the distribution system determined at various voltage level by the state commissions.

Cost Benefit Analysis for Express Feeder Industries Sr No Rate (in Rs/KWh) In 2015 Particulars At 11 k. V & 22 k. V At 33 k. V 66 KV & Above 1 IEX Price 2. 49 2 Regional Losses (2. 04%) 0. 06 3 Mah Trans Losses ( 3. 89%) 0. 1 4 Wheeling Losses ( 9% And 6% ) 0. 24 0. 16 0 5 Regional Transmission Charges 0. 25 6 Mah Trans Charges 0. 26 7 Wheeling Charges 0. 83 0. 15 0 8 IEX Transaction Fees 0. 02 9 Operating Charges (SLDC, NLDC) 0. 15 10 Cross Subsidy Surcharge 1. 49 11 Trading Margin 0. 02 5. 91 5. 15 4. 84 Total Cost Note: -FY 2015 -16 Avg MCP Rate 2. 49 Rs/Unit

Cost Benefit Analysis for Non-Express Feeder Industries Sr No Rate (in Rs/KWh) In 2015 Particulars At 11 k. V & 22 k. V At 33 k. V 66 KV & Above 1 IEX Price 2. 49 2 Regional Losses (2. 04%) 0. 06 3 Mah Trans Losses ( 3. 89%) 0. 1 4 Wheeling Losses ( 9% And 6% ) 0. 24 0. 16 0 5 Regional Transmission Charges 0. 25 6 Mah Trans Charges 0. 26 7 Wheeling Charges 0. 83 0. 15 0 8 IEX Transaction Fees 0. 02 9 Operating Charges (SLDC, NLDC) 0. 15 10 Cross Subsidy Surcharge 1. 09 11 Trading Margin 0. 02 5. 51 4. 75 4. 44 Total Cost

Cost Benefit Analysis for Industries

Impact of IEX on the Sector

Viability assessment: Open Access in States Industrial Tariff (33 k. V) v/s IEX landed cost (@2. 5/unit) High Saving Potential 9. 00 8. 00 7. 21 5. 85 5. 04 4. 80 5. 00 3. 00 6. 43 6. 71 5. 79 6. 00 4. 00 7. 21 6. 50 6. 35 3. 61 3. 70 4. 15 3. 46 Tariff 7. 69 4. 90 4. 64 6. 33 6. 25 5. 84 5. 80 5. 60 4. 694. 70 3. 97 4. 975. 10 3. 85 3. 10 IEX Landed Cost 3. 24 4. 78 4. 83 5. 10 4. 74 3. 50 3. 65 3. 16 2. 85 5. 50 5. 61 5. 57 5. 385. 25 5. 24 4. 13 3. 95 6. 48 6. 35 7. 16 7. 12 6. 67 5. 89 4. 26 4. 20 3. 03 2. 60 2. 00 1. 00 Rajasthan Uttar Pradesh Delhi DND Karnataka Maharashtra (Ex) Maharashtra (Non Ex) Jharkhand Haryana Kerala Assam Chandigarh Punjab Bihar Chattisgarh Telangana Arunachal Pradesh DNH Madhya Pradesh Uttarakhand Gujarat Orissa Andhra Pradesh Himachal Pradesh Tamil Nadu Jammu & Kashmir West Bengal Meghalaya 0. 00 * Industrial tariff at 33/66 k. V, IEX landed cost includes OA charges and assuming cleared price at Rs 2. 50/unit

Trade @ IEX

Registration PRE -TRADING SELECTION OF MEMBER 1 week MEETERING ü Special Energy Meter ü Identify vendor to procure and install SLDC Clearance/NOC ü NOC from respective SLDC ü Format PX 1 Registration at IEX Member Related Activities Exchange Related Activities 0. 5 -3 Months 1 Month ü Client registration for each point of drawal ü Unique id created in Exchange system 0. 15 Month

Power Market Outlook • Prices at Exchange will continue to be lower in the coming months. • Installed capacity of India has reached about 281 GW. • Peak demand was only 150 GW, hence surplus capacity. • Coal production in the current year (1015 -16) has increased by about 9% over previous year. There is no major change in demand pattern. • E-auction prices have also come down due to increased availability of Coal. • Sell quantum available in power market has increased due to higher availability of coal at reasonable prices. This is likely to continue in coming months. • Transmission capacity has increased with commissioning of lines. No congestion for Northern region after Sept 15 except for brief period in Jan’ 16 due to tripping of line.

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Cost Benefit Analysis for Industrial Consumers- IEX vis-à-vis Discom S. No. Particulars 33 k. V 132 kv 1 2 3 4 5 6 7 8 9 10 11 Price at IEX (FY 16) (assumed BID by the client if cleared at exchange) Losses of WR (POC Loss=2. 05%) Losses of Western Transmission (Loss= 3. 89%) Losses of Maharashtra Wheeling (Loss= 6% (33 KV)Or 9 % (22 KV)) Transmission Charges of WR (POC Charge) Transmission Charges of Maharashtra Wheeling Charges of Maharashtra per unit IEX Margin per unit NLDC, SLDC Processing & Operating Charges Cross Subsidy Surcharge (Exp Feeder) Trading charges Total Landed Cost through IEX Test Case - Cost Benefit Analysis Power Consumption (In MW) through out the day Number of Hours of Purchase Number of Units Consumed per day Rate of procurement from State Discom (In Rs/k. Wh) Average rate of procurement through IEX Net payable as per state tariff (Rs) Net payable as per IEX (Rs) Savings through IEX vis a vis state Discom on daily basis (Rs) 2. 46 0. 05 0. 10 0. 15 0. 26 0. 15 0. 02 0. 05 1. 49 0. 02 5. 00 2. 46 0. 05 0. 10 0. 00 0. 26 0 0. 02 0. 05 1. 49 0. 02 4. 70 1 24 24, 000 7. 21 5. 00 173040 119969 53, 071 1 24 24, 000 7. 21 4. 70 173040 112827 60, 213 15. 92 191. 05 18. 06 216. 77 1 2 3 4 5 6 7 8 Savings through IEX vis a vis state Discom on Monthly basis (Rs. Lacs) Savings through IEX vis a vis state Discom on Yearly basis (Rs. Lacs)

Silent Features of Dist OA 2016 Ø Eligibility to seek Open Access Contract Demand >=1 MW has been allowed. Ø DAM through power Exchange is allowed. Ø Multiple Sources are allowed. Ø Contract Demand Reduction • Consumer availing STOA shall not be eligible to revise his Contract Demand with the Distribution Licensee during the tenure of the STOA, but may do so at the time of applying for OA permission. Ø Banking of Energy is permitted.

Day-Ahead Open Access Ø Permitted only if surplus capacity is available in the system of Distribution Licensee. Ø The Application for grant of Day-Ahead Open Access shall be made to the Nodal Agency only one day prior to the date of scheduling, up to 12: 00 Hours. • Illustration: -An Application for Day-Ahead transaction on 15 th August shall be received only on 14 th August up to 12: 00 hours. Ø Application received after 12: 00 hours of the day immediately preceding the date of scheduling or on the day of scheduling shall be considered in case of contingency of the Applicant, and the fee for such contingency Applications shall be five times the otherwise applicable Application fees.

Day-Ahead Open Access Ø The Nodal Agency shall check for congestion and convey grant of approval or otherwise in the format provided in Annexure III [Format-ST 2] by 14: 00 Hours of the day preceding the date of scheduling of the transaction. ” Ø All applicable STOA provisions shall apply to application for Day ahead OA.

Annexure III Format – ST 2

Annexure III Format – ST 2 (Cont. )

Prices for various time block March 2016

IEX Monthly Cleared Volume

IEX Day Ahead Market Price & Volume Trend March 2016