Availability Based Tariff and its impact

On different Industry Players-A Review

R.M.Holmukbea,
ab.c.d

Ms.Yogini Pawar", R.S.DesaiC, T.S.Hasarmanid

Electrical Engineering Department, Bharati Vidyapeeth Deemed University,

College of Engineering, Pune, India
a rajeshmholmukhe@hotmail.com

Abstract. ABT is a performance-based tariff for the supply of electricity by generators owned and
controlled by the central government. It is also a new system of scheduling and dispatch, which requires
both generators and beneficiaries to commit to day-ahead schedules. It is a system of rewards and penalties
seeking to enforce day ahead pre-committed schedules, though variations are permitted if notified One and
one half hours in advance. The order emphasizes prompt payment of dues.ABT (Availability Based Tariff)
along with the Electricity Act of 2003 is perhaps the most significant and definitive step taken in the Indian
power sector so far to bring more efficiency and focus to this vital infrastructure. The ABT mechanism is
based on financial principlesuABT scheme is for unscheduled interchange of power. The paper reviews ABT
issues, its components, clauses, mechanism, benefits and
the impact of grid on different players like
generation utilities, grid operator, consumers involved in power generation, transmission and distribution.
While the proposed tariff structure has wide implications for each player, this deals exclusively with the
technology challenges/opportunities thrown up by ABT.
Keywords: Availability
Transmission systems.

based

tariff(

ABT),

Central

Electricity

Regulatory

Commission,

Utilities,

INTRODUCTION
An interconnected system with thousands of kilometers of lines and hundreds of
generators operating with split second synchronism is the greatest scientific
achievement of the millennium. It is the largest single machine ever created.
Electricity Sector in India overview:Power Infrastructure in India (end Jan.'09)
GENERATING CAPACITY: 147458 MW
FUEL

MIX

RES"(MNRE)
.13242.41.9%

Nuclear.412O.
3%

Total ThennaJ

93332.64,
63%

IC1 Totallhermal

Nuclear

Hydro (Renewable)

RES ..(MNAE)

Central.
48970_99~ ""\.
33%

"~

__

--.-......,

_
81a1&
76240.57,
52%

Private.
22246.25.
15%

t'l State

Private

Central

Figure 1. Generating capacity and Power Infrastructure in India:

CPI298, International

Conference on Modeling. Optimization, and Computing, (ICMOC 2010)

edited by S. Paruya, S. Kar, and S, Roy
2010 American Institute of Physics 978-0-7354-0854-8/10/$30.00

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yennissions

The main objectives of ABT mechanism have been:

Encourage grid discipline

Promote trade in energy and capacity
Economic load dispatch
Encourage higher generation availability

There are few issues in ABT implementation which are as

follows:
1) Addressing grid disturbance issues
2) Gaming and avoiding the same
3) Requires special meters, remote metering with open protocols and communication
mechanisms to read meters timely
4) Software that is comprehensive to do calculations, address regulatory issues and
modifications as per different Regulatory Commission requirements.
5) Interface options to various stakeholders in the ABT mechanism online to enable
effective implementation and benefits to all
6) Capability of power producers to be able to control their cost of production as well
as flexibility in operations.
Some of the adverse grid conditions are:
I) Wide frequency fluctuations cause serious damages at Generation & load ends.
2) Low frequency during peak load hours, with frequency going down to 48.0 - 48.5
Hz. for many hours every day.
3) High frequency during off peak hours, with frequency going up to 50.5 to 51Hz. for
many hours every day.
4) Rapid and wide changes in frequency - 1 Hz. change in 5 to 10 minutes, for many
hours every day.
5) Very frequent grid disturbances, causing tripping of generating stations,
interruption of supply to large blocks of consumers, and disintegration of the regional
grids.
Earlier there were few problems which are self explanatory from following
figure:
PRE-ABT
Frcq.,-,_~

problems

in Grid operation

(Hz)
',toad

~~I)L---------+-------~~--------+F~~--~--~
1 Lavv frequency:
48 - 48.5 Hz
4

High frequency:
50.5 - 51 Hz

Frequent grid disturbances:

Rapid change:
lHzin5-10
minutes;
rriarry hours everyday

Generator
trippings,
supply intenupt'ions,
grid disintegration

Figure 2: Pre-ABT problems

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The CTU has stated that the solution to these problems lies in:
1) Maximization of generation during peak load hours and load curtailment equal to
the deficit in generation
2) Backing down of generation to match the system load reduction during off peak
hours, as per merit order of generation.
3)LGB (Load - Generation balance to be maintained
Thus Central Transmission
the following figure:

Utility (CTU)'s resolution can be understood

from

Maximisation of generation
Load curtailment equal to the deficit in generation.
Peak

Load(MW)
Off-Peak
/./

Backing down of generation

to match the system load reduction
keeping the merit order of generation in view

Figure 3: Central transmission utility resolution

Indian version of Availability Tariff comprises of three components:

(a) capacity charge, towards reimbursement of the fixed cost of the plant, linked to
the
plant's declared capacity to supply MW s,
(b) energy charge, to reimburse the fuel cost for scheduled generation, and
(c) payment for deviations from schedule, at a rate dependent on system conditions.
I. SALIENT CLAUSES OF

ABT

ABT concerns itself with the tariff structure for bulk power and is aimed at bringing
about more responsibility and accountability in power generation and consumption
through a scheme of incentives and disincentives. As per the notification, ABT is
applicable to only central generating stations having more than one SEB/State/Union
Territory as its beneficiary. Through this scheme, the CERC (Central Electricity
Regulatory Commission) looks forward to improve the quality of power and curtail
the following disruptive trends in power sector:
i)
Unacceptably rapid and high frequency deviations (from 50 Hz) causing
damage and
disruption to large scale industrial consumers
ii)
Frequent grid disturbances resulting in generators tripping, power outages and
power grid disintegration
This objective is to be brought about by encouraging generators to produce more
during peak load hours and curtail generation adequately during off-peak hours on one
hand and discouraging consumers from overdrawing on the other hand. The new tariff

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regime aims at inducing this discipline at the generation and consumption end through
adequate monetary incentives.
The most significant aspect of ABT:
The most significant aspect of ABT is the splitting of the existing monolithic energy
charge structure into three components viz. capacity charges (fixed), energy charges
(variable) and UI (unscheduled interchange) charges. It is the last component that is
expected to bring about the desired grid discipline. Splitting of the tariff into fixed and
variable cost components is meant to act as an incentive for power trading which shall
(ideally) conclude in a self-regulating power market regime. It is also expected to
promote the concept of ELD (Economic Load Dispatch) among power generators. Let
us now look at these tariff components in a bit more detail:
1.1 Capacity charges:
Fixed charges are payable to the generating station, by the intended beneficiaries of
the generation facility (state governments of the region in most cases). In the present
tariff regime, capacity charges are payable against the (deemed) PLF (Plant Load
Factor) of the station.
1.2 Variable charges:
Under the present tariff regime, there is no bifurcation between fixed and variable
charges. Both are bundled together and payable in proportion to the actual energy
drawn by the consumer. As we have seen already, under ABT fixed charges vary with
the allocated capacity and has nothing
to do with actual energy consumed. In contrast, variable charges are to be paid against
the actual energy consumed. This splitting is expected to promote power trading.
1.3 VI charges:
In the present regime, there is no penalty for deviation from the generatingldrawal
schedule by an entity. The ABT regime stipulates that UI (Unscheduled Interchange)
charges are payable under the following conditions:
a) A generator generates more/less than the schedule causing grid frequency to
deviate upwards/downwards
b) A beneficiary draws more/less than the schedule causing grid frequency to
Deviate downwards/upwards
II. DEVIATIONS

FROM SCHEDULE

As mentioned earlier, the energy charge, at the specified energy charge rate
of a generating station, is payable for the scheduled energy quantum. The energy
actually supplied by the generating station may differ from what was scheduled. If
actual energy supplied were higher than scheduled, the generating station would be
entitled to receive a payment for the excess energy (the deviation from schedule,
technically termed as Unscheduled Interchange (UI) in Availability Tariff
terminology) at a rate dependent on frequency at that time. If the energy actually
supplied is less than what is scheduled, the generating station shall have to pay back
for the energy shortfall, at the same frequency - linked rate
The relationship between the above UI rate and grid frequency, for the interState system, is specified by CERe. The present relationship, applicable from
1.10.2004, is shown in figure below.

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100

t- t.-----t---t--.i----i ----i---f

-----t----~---:

AGO

'li

r:1
i

-----J-----~----i----~-----J-----1

-----.----.-----1---'-----i----i-----i-----~-----I
::::::::
-----L---~----L----~-----: --i----L----L----

<ii
;; 200

:!:::

_____~-_--~..--..-i-o---i -----l-----~---

i!

~_.---

j
1
O+-~~--+__+--r_4__+--~~
ca..

43

AtS.2

~A

43.&

G.'

50

Fig. 4 - VI RATE table

1000

~~-+--+_~--_r--r__+--+_~
o

Fig 5 UI rate averaging

2.1 Apart from this tariff structure, ABT provides for

a) Implementation in a phased manner
b) Generation and drawal schedules to be managed in 15 minute blocks (96 blocks per
day)
c) Mechanism for communication and co-ordination of the schedules and how
rescheduling is to be done in case of a generatorlbeneficiary being unable to meet the
schedule
d) Role of regional load dispatch centers (RLDC) in managing and coordinating the
schedule and managing the schedule in the event of grid disturbances
e) Methodology for calculating the capabilities for different types of power stations
(such
as hydro, thermal, nuclear) and for demonstrating the same
f) Details on metering, accounting, billing and payment of energy charges under the
ABT regime
g) How disputes arising under ABT shall be resolved

ITI. HOW DOES THE MECHANISM WORK

The process starts with the central generating station in the region declaring
their expected output capacity for the next day to thr regional load dispatch center-The
regional load dispatch center breaks up and tabulates these output capacity declaration
as per the benefitaries plant wisw shares and conveys their entitlement in the state load
dispatch center-The later then carries out the exercise to see how best they cab meet
the load of their consumers over the day,from their own geberating stations, along with

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their entitlement in the central stations. The SLDC 's then convey to the RLDC their
schedule of power drawal from the central stations.The RLDC aggregates these
requisitions and determines the dispatch schedules for the central generating stations
and the drawal schedules for the benefitaries duly incorporating any bilateral
agreements and adjusting for transmission losses.
As long as the actual generationJdrawal is equal to the given schedule, payment
on account of the third component of Availability Tariff is zero. In case of underdrawal, a beneficiary is paid back to that extent according to the frequency dependent
rate specified for deviations from schedule.
3.1 Need of Availability Tariff:
Prior to the introduction of Availability Tariff, the regional grids had been operating
in a very undisciplined and haphazard manner. There were large deviations in
frequency from the rated frequency of 50.0 cycles per second (Hz). Low frequency
situations result when the total generation available in the grid is less than the total
consumer load. These can be curtailed by enhancing generation and/or curtailing
consumer load. High frequency is a result of insufficient backing down of generation
when the total consumer load has fallen during off-peak hours. The Availability
Tariff directly addresses these issues:
By giving incentives for enhancing output capability of power plants, it
enables more consumer load to be met during peak load hours.
Backing down during off-peak hours no longer results in financial loss to
generating stations, and the earlier incentive for not backing down is
neutralized.
How does it benefit everyone?
The mechanism has streamlined the operation of regional grids in India.
Any constituent which helps others by under-drawal from the regional grid in a
deficit situation, gets compensated at a good price for the quantum of energy
under-drawn.
The grid parameters, i.e., frequency and voltage, have improved, and
equipment damage correspondingly reduced.
Because of clear separation between fixed and variable charges, generation
according to merit-order is encouraged and pithead stations do not have to
back down normally. The overall generation cost accordingly comes down.
Mechanism is established for harnessing captive and co-generation and for
bilateral trading between the constituents.
3.2 Benefits professed by ABT
Enhanced grid discipline that will pave the way for higher quality power with
more reliability and availability.
A more economically viable power scenario that alleviates some of nagging
problems of the power sector such as outdated technology, poor management
and maintenance, cross subsidization, over staffing, poor accounting practices
etc.
Promote competition, efficiency and economy leading to power trading which
shall ultimately pave way (step-by-step) for a self-regulating power market.

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Introduce and encourage MOD (Merit Order Dispatch) in the Indian power
scene. In the current scenario, the generators tend to produce as much as they
can irrespective of the demand side of the power equation. Under ABT,
generators will need to ramp up and ramp down generation based on the
declared generation schedule given by the RLDC (Regional Load Dispatch
Center).
3.3 Concerns on ABT
ABT is welcome step towards a self-regulating market; there are a lot of concerns that
need to be addressed by this new system.
3.4 Some of the important technical concerns to be addressed by ABT are:
a) What happens to the schedule and VI charges in instances of the grid disruption
beyond the control of generator or consumer?
b) A fundamental concern on ABT is whether it is the right measure to be introduced.
There is serious concern that it introduces elaborate and complicated procedures that
shall give rise to a lot of contentions between involved parties on their interpretation.
c) Acceptable availability may vary depending on the energy source of the generating
station. This will pose problems in calculation of fixed charges based on availability
d) Plants commissioned in different times tend to use vastly varying technology and
thus tend to differ a lot in efficiency and cost of production.
e) Possibility of gaming (deliberate manipulation of availability, daily demand and
capacity schedules etc.) by the involved parties to derive undue benefit from the UI
charges
f) Any revision in schedule by the RLDC will deemed to be effective irrespective of
the successful communication of the same to concerned parties.
3.5 Implications for different industry players:
1) All the generators will now need to set a target of 85% availability to ensure that
complete capital costs, ROE and incentives are available to them.
2) The provision for surprise audit to demonstrate the availability will need to them to
monitor all the equipments and ensure adequate and timely maintenance of their
overall infrastructure. Variable costs and VI charges will require the generators to
closely match their output with the demand curve and the ability to take corrective
actions in the shortest possible time.
3) ABT also calls for elaborate computation of the payable tariffs and close
monitoring of the cost of production.
4) At the consumption end also there is going to be the need to forecast demands as
accurately as is possible and to follow the strictest possible grid discipline.
5) Again, depending on the frequency pattern and availability of water, each hydro
station can be assigned a threshold frequency

IV. IMPACT OF ABT ON DIFFERENT PLAYERS

4.1 Impact on generation utilities
Of the three, power generation utilities will need to adapt most to the ABT regime.
This because most of the changes specified in the ABT, such as computation of
capacity charges, assessment of plant availability, revised tariff structure, VI
(unscheduled interchange) charges etc. will be of direct significance to power

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generation companies .. Under ABT, there is a paradigm shift for generating stations
from maximum power to maximum reliability. Pre-ABT generating stations used to
generate to their capacity irrespective of load demand in the network. Under ABT
regime, the loads requirements are given in 15-minute blocks and the generating
station needs to closely follow this demand curve so that frequency deviation on either
side of 50 Hz is a minimum.
4.2 Impact on grid operator
Grid operator typically manages the power transmission infra-structure. This will
correspond to the role of the ISO (independent system operator) in more evolved
power markets. Independent system operator goal is to ensure smooth operation of the
grid and to ensure adequate load-supply balance in the grid.
4.3 Impact on consumers
The major thrust of ABT is to improve the reliability and quality of the power grid.
Primary beneficiary of such an enhanced system would be the consumers. (State
Electricity Boards and other major distribution companies).

CONCLUSION
ABT is a necessary development. Concerned authorities must create
infrastructure to remove all the bottlenecks on the transmission side. Thus there will
be completely market driven scenario with much better systems and infrastructure in
place.
Implementation of ABT will assist the goal of restructuring of Indian power
sector and increasing the reliability of power system. This further will enrich the grid
discipline by frequency dependent pricing.
Thus we conclude that the path from ABT to a self-regulating power market is
full of potential and requires determination.

ACKNOWLEDGMENTS
Bharati Vidyapeeth Deemed University College of Engineering, Pune

REFERENCES
Introduction to Availability Based Tariff -A White Paper, Kalki.
Communication Technologies Private Limited, Kalki.
[2] ABC of ABT A Primer on Availability tariff, Bhanu
Bhushan.
[3] Impact of ABT on different players A White Paper, Kalki
Communication Technologies Private Limited, Kalki.
[4] ABT to deregulated power market A White Paper, Kalki
Communication Technologies Private Limited, Kalki.
[5]A.P.Agalgoankar, S.V.Kulkarni, S.A.Khaparde,
S.A.Soman,"Distributed Generation Opportunity under
Availability Based Tariff and Reliability Conditions,
International Journal of Emerging Electrical Power Systems,
Volume 2, Issue 1,2005, Article 1035.
[6 ] http:/www.cercind.org
[7] http:/www.dker.org
[8] http:/www.nrldc.org
[9] powermin.gov.in
[I]

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