Case No. 56 of In the matter of

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1 Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai Tel / 65/ 69 Fax Website: / Case No. 56 of 2012 In the matter of Petition of Maharashtra State Load Dispatch Centre (MSLDC) for removal of difficulties in the matter of operation and implementation of the Intra-State ABT Order in Case No. 42 of Smt. Chandra Iyengar, Chairperson Shri. Vijay L. Sonavane, Member ORDER Dated: 11 April, Maharashtra State Load Dispatch Centre (MSLDC) submitted a Petition on 8 June, 2012 under Section 86(1) clause (b) and (f) & Section 2 clause (1) and (3) of the Electricity Act (EA), 2003 for removal of difficulties in the matter of operation and implementation of the Intra-State ABT Order dated 17 May, 2007 in Case No. 42 of 2006 (hereinafter referred to as Intra-State ABT Order ) MSLDC also submitted a rejoinder to the above mentioned Petition on 24 January, 2013 enlisting a few additional difficulties in the matter of operation and implementation of the Intra-State ABT Order. These difficulties were observed while MERC, Mumbai Order in Case No 56 of 2012 Page 1 of 35

2 carrying out balancing and settlement as per the Intra-State ABT Order after submission of Petition and during the discussions following submission of Petition The National Electricity Policy (NEP) was notified by Central Government on 12 February, The clause 5.7.1(b) of the NEP mandates Appropriate Commissions to introduce Availability Based Tariff (ABT) mechanism at State level In line with the above mentioned clause of NEP, Maharashtra Electricity Regulatory Commission (MERC) issued the referred Order on 17 May, 2007 in Case No. 42 of 2006 regarding Introduction of Availability Based Tariff Regime at State level within Maharashtra and other related issues (Intra-State ABT Order) The directions issued in paragraph and subsequent paragraphs of the Intra-State ABT Order specify responsibilities of MSLDC for carrying out the technical balancing as well as commercial settlement for the State of Maharashtra. As per the Commission s Order, MSLDC developed Interim Balancing and Settlement Mechanism (IBSM) for carrying out balancing and settlement till the finalisation of Final Balancing and Settlement Mechanism (FBSM). IBSM was applicable from 1 October, Accordingly, billing under IBSM was started by MSLDC from 30 July, 2007 for period October 2006 onwards. FBSM was implemented on 1 August, 2011 after approval of the Commission on 23 August, 2009 and after overcoming the constraints in its implementation. The Commission, vide its letter dated 7 July, 2011, also directed MSLDC to implement FBSM immediately and sort out the issues during implementation phase While carrying out balancing and settlement as per FBSM, MSLDC experienced several issues which were enlisted in the present Petition and the rejoinder The issues mentioned above are dealt with in detail in subsequent sections of this Order. The Regulatory proceedings undertaken by the Commission in this matter are provided in the following paragraphs. 2. Regulatory Proceedings 2.1. The Commission conducted the first hearing in the present Petition on 9 July, In the above hearing, MSLDC presented the difficulties and issues in implementation of MERC, Mumbai Order in Case No. 56 of 2012 Page 2 of 35

3 the Intra-State ABT Order. The Commission was of the opinion that a Zero Base Review would help to arrive at a clearly articulated objective of implementation of the balancing and settlement code which was in effect for the State of Maharashtra. It was decided that this may be evaluated against the objectives envisaged at the inception of FBSM and may be compared with the National system of frequency based Unscheduled Interchange (UI). The Commission also expressed the need of a simple and implementable method of balancing and settlement mechanism in the State. The Commission directed MSLDC to submit its own independent report of Zero Base Review before the Commission The Commission further directed that the above submission shall also include the advantages and disadvantages of Weighted Average System Marginal Price (WASMP) based system and to what extent the Frequency Based System can facilitate solving the issues mentioned in the Petition. The Commission also directed MSLDC to evaluate the treatment of the difficulties mentioned in the Petition as per the Inter-State ABT mechanism and incidence of any other issues that may surface due to its adoption instead of the existing Intra-State ABT mechanism. The Commission also directed MSLDC to present a paper on the issues discussed during the hearing at the Forum of Load Dispatchers (FOLD) meeting to seek the expert opinion of other LDCs (Load Despatch Centres) for arriving at the best implementable solution. The Commission also directed MSEDCL to submit the list of substations having Special Energy Meters (SEMs) installed and yet to be installed as per the ABT Requirement The second hearing in the matter was held on 17 August, During the hearing, MSEDCL, TPC and RInfra made their submissions regarding issues raised in the Petition. The Commission opined that the functions of MSLDC, as per the Electricity Act, 2003, should be to ensure operational stability and safety of grid. The Commission expressed that the current role of MSLDC in ensuring economics of the power transactions by preparing the Merit Order Dispatch should be carefully analysed and debated with various stakeholders. The Commission also directed all utilities to perform a literature survey on the Intra-State ABT mechanism to have a detailed understanding of the complex issues of ABT. The Commission also directed MERC, Mumbai Order in Case No. 56 of 2012 Page 3 of 35

4 that the Power Exchanges may be involved in this matter to understand their views and concerns on the existing Intra-State ABT mechanism MSLDC vide a Rejoinder dated 24 January, 2013 submitted additional issues in the FBSM The Commission constituted a Committee (hereafter referred to as FBSM Committee or Committee ) under the Chairmanship of Dr. S. A. Khaparde, Professor (Electrical Dept.), IIT, Mumbai and various representatives from Veermata Jijabai Technological Institute (VJTI), Western Region Load Despatch Centre (WRLDC), State Transmission Utility (STU), State Load Despatch Centre (SLDC), MERC and all DISCOMs in the State of Maharashtra. The scope of work for the above referred Committee was to carry out a De-Novo Zero Base Review of Balancing and Settlement Mechanism for Intra State ABT In Maharashtra as compared to the system prevalent for Inter-State ABT in Rest of India (hereinafter referred to as Zero Base Review ). The Commission directed the Committee to submit its report within a period of 3 months from the date of formation of the Committee as per Commission s Office Order dated 28 March, The Committee had four (4) meetings to identify and resolve various issues raised in the present Petition. The balancing and settlement mechanism (BSM) in the State was also discussed. The Committee studied the Intra-State ABT mechanism and understood the difficulties represented by the various stakeholders The Committee submitted its report on the Zero Base Review along with its recommendations on 4 September, During the third hearing held on 11 February, 2014, the Commission, referring to the Regulation 83 of MERC (Conduct of Business) Regulations, 2004, directed to serve copies of FBSM committee report and directed Maharashtra State Electricity Distribution Company Limited (MSEDCL), Tata Power Company Limited (TPC), Reliance Infrastructure Limited (RInfra) and Brihan Mumbai Electric Supply & Transport Undertaking (BEST) to give comments and suggestion on the Committee Report within 10 days. MSLDC was also directed to submit potential solutions on the difficulties faced in implementation of Intra-State ABT Order. MERC, Mumbai Order in Case No. 56 of 2012 Page 4 of 35

5 2.9. Fourth hearing in the matter was held on 11 March, 2014 wherein the Commission acknowledged the receipt of comments and suggestions from BEST, RInfra & TPC. However, the Commission observed that MSEDCL had not submitted its comments and suggestions on the Committee Report, rather through a letter dated 10 March, 2014 requested for a grant of three weeks time for submission of comments and suggestions. The Commission in the above specified hearing directed MSEDCL to submit the comments and suggestions within 2 weeks. The same was submitted by MSEDCL through a letter dated 26 March, 2014 for the consideration of the Commission Having heard all the parties, considering the Committee Report and considering the comments and suggestions submitted by BEST, RInfra, TPC and MSEDCL, the key broad concerns in the present matter before the Commission are as follows: A. Possibility of finding solution to the issues raised by MSLDC within FBSM B. Gauging how the issues raised are addressed in Inter State ABT mechanism C. Impact of migration of Intra State ABT mechanism from the existing system to a system similar to the Inter-State ABT mechanism The above key broad concerns are dealt in the Commission s views against the issues raised by the Petition and are provided in detail in subsequent sections of this Order. 3. Brief summary of Zero Base Review Report 3.1. The Committee reviewed the existing Intra-State ABT mechanism and the corresponding difficulties highlighted in this Petition filed by MSLDC. The Committee also studied the frequency linked mechanism implemented for Inter-State ABT mechanism. Both these mechanisms were analysed for their advantages and disadvantages Both the mechanisms were found to be fundamentally different but serving the same purpose. Therefore, the Committee was of the view that, instead of focusing on superiority of the mechanism, its suitability in the prevailing scenario needs to be emphasised. The Committee was of the opinion that simplicity, transparency, real- MERC, Mumbai Order in Case No. 56 of 2012 Page 5 of 35

6 time pricing and quick & dispute free commercial settlements were of utmost importance in Indian conditions. Therefore, a frequency linked mechanism was found to be more suitable in the existing situations by the Committee The Committee submitted that scheduling process needs to be decentralized and settlement of deviations needs to be linked to the frequency The Committee submitted that most of the difficulties identified in the Petition would be addressed by implementation of the BSM on the lines of Inter-State ABT mechanism. In case of any alteration of the Inter-State ABT mechanism, similar mechanism with necessary customization may be adopted as Intra-State ABT mechanism The Committee opined that frequency linked mechanism also demonstrates inherent limitations which may be addressed by applying appropriate customization introduced only after successful implementation of the frequency linked Intra-State ABT mechanism The Committee suggested implementation in two phases. A. Phase-I: Implementation of de-centralized scheduling and frequency linked deviation settlement mechanism; and B. Phase-II: Implementation of State level customization for improving the BSM after ensuring successful implementation of Phase-I implementation The Committee submitted that after successful implementation of decentralized scheduling and frequency linked UI settlement, the mechanism may be updated to partially include centralized despatch process and Control Area Deviation (State level customizations) in Phase-II of implementation As far as hydro resources are concerned, the Committee opined that, hydro resources should be used for benefit of the State, at the same time it should also respect the existing contractual agreement between hydro generating stations and DISCOMs It also recommended conducting capacity building exercises for the concerned stakeholders for successful implementation. MERC, Mumbai Order in Case No. 56 of 2012 Page 6 of 35

7 3.10. Analysis of the Commission Analysis of the difficulties highlighted in the present Petition, recommendations of the Committee, comments and suggestions submitted by the Distribution Licensees and the Petitioner and the Commission s views on the same are detailed in subsequent sections. A. Control of Intra-State Short Term Open Access (STOA) transactions under State Merit Order Despatch (MOD) Description of the issue MSLDC submitted that as per the provisions in clauses 4.5(e), 4.6(d), 4.7(d) & (e) and 7.3.1(e) & (f) in the Intra-State ABT Order, variable costs of generators approved by the Commission are considered for preparing merit order stack for MOD. But the STOA rates are composite in nature as against two part Tariff in case of Generators under Long Term Contract where the Fixed Cost Reconciliation is separately envisaged in Intra-State ABT Order. The STOA rates are generally contract rates which are not necessarily unit-wise. Therefore, it is difficult for MSLDC to arrive at the MOD as per Intra-State ABT Order. Recommendation of the Study The Committee analysis on the treatment of STOA in the MOD transactions highlighted that STOA transactions play important role in altering real-time drawal of the DISCOM in which they are being executed. But the Committee infers that the difficulties aroused in centralized despatch mechanism will be removed with introduction of decentralized despatch as implemented at inter-state level as the utilities executing such transactions will be members of the pool and they shall be accountable for any deviations from their schedule. Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC, in its submission, supported recommendation of the Committee for decentralisation of scheduling process. Whereas, MSLDC pointed out that as per the recommendation of the Committee, the State MOD cannot be envisaged. MSEDCL submitted that MERC, Mumbai Order in Case No. 56 of 2012 Page 7 of 35

8 existing Intra-State ABT mechanism with centralised despatch assists in achieving the economic despatch of power and optimum utilisation of natural resources within the State. MSEDCL also submitted that all open access generators who become State pool participants need to be penalised for under generation at higher of the following, i.e., (a) rate of State s costly generation, (b) rate corresponding to the UI frequency and (c) its rate as per contract. Commission s views The Commission is of the view that the new Intra-State ABT mechanism would recognise all the Licensees, Open Access Short term / Medium term / Long term Generators / Consumers as members of the pool. Under such circumstances, the STOA constituents would have to schedule the drawal / injection in line with Inter- State ABT mechanism. Deviation from this schedule would result in corresponding treatment similar to the CERC (Unscheduled Interchange charges and related matters) Regulations, 2009 (hereinafter referred to as CERC UI Regulations, 2009). Therefore, STOA is not exposed to any Merit Order Despatch and governed only by the applicable UI Regulations. As regards the submission of MSEDCL regarding the preference of Centralised scheduling mechanism, it may be noted that the existing system is unable to tackle some of the critical issues of operation as per FBSM. Therefore, the Commission is of the view that the despatch of power in the new Intra- State ABT mechanism may include decentralised of load despatch. Regarding the penalty, as per the new Intra-State ABT mechanism, any deviation shall be treated at the UI rate corresponding to the prevalent frequency. B. Constraints of ramping rate of thermal generators in operations of State MOD on 15 minute block basis and achievement of Real time MOD Description of the issue Merit Order Despatch is carried out by MSLDC for every 15-minutes time block as per the provisions in clauses 4.5(e), 4.6(d), 4.7(d) & (e) and 7.3.1(e) & (f) in the Intra- State ABT Order. MSLDC submitted that a few thermal generating stations are found to be high on the Merit Order Stack (MOS) being considered for executing the Merit Order Despatch. Under such circumstances, if the supply of power is higher than its demand by a large margin for a specific time block, the units at the top of the MOS MERC, Mumbai Order in Case No. 56 of 2012 Page 8 of 35

9 have to be backed down as per the Intra-State ABT Order. However, owing to ramping up / down constraints of the thermal power plant, large block to block variations in the schedule of the thermal power plants is practically not possible. In addition to this, the continuous variation of thermal stations is not desirable from generator s point of view. MSLDC questioned the operational philosophy for carrying out MOD wherein the thermal stations appear to be in the SMP of a utility instead of being a must-absorb for that utility Hydro power generating stations are scheduled on a day-ahead basis depending up on its usage on the previous day. But they are operated as per system requirements to manage the State UI. The capacity of Koyna Hydro Power Station is contracted by MSEDCL. But variation in load balance in the State is managed by varying power generation of Koyna Hydro Power Station. MSLDC questioned this practice of using power generation of Koyna Hydro Power station for operation of State MOD in real time when thermal power stations cannot back down owing to their ramp up / down rates. Recommendation of the Study The Committee suggested that MOD should also incorporate all factors like technical limitations and accommodation of fixed cost. The Committee specified that in case decentralised balancing and despatch is implemented, the problem shall be resolved as the MOD constraints at the State level shall not be binding on them. This would still minimize generation cost for the whole State by being Pareto efficient. In the report, the committee submitted that MOD can be operationally achieved by introducing constraint based MOD which would include fixed cost along with the variable cost. The Committee was of the view that in case of decentralised despatch, the difficulty would be automatically resolved as minimisation of generation cost for whole State would not be the objective. Though the schedule obtained might not be economically efficient, it would tend to being economically efficient The Committee analysis on constraints of ramping rate of thermal generators in operations of State MOD acknowledges that cost cannot be the sole criteria in deciding whether a plant has to be backed down or ramped up. MERC, Mumbai Order in Case No. 56 of 2012 Page 9 of 35

10 3.20. As regards the control of Hydro power generating stations, the Committee specified that the hydro generating stations as identified by the Commission should be treated in separate category and should not be linked to regular schedule and UI. The control of the hydro should be with MSLDC and should be operated only for benefit of the State and nation with constraints like irrigation requirements, water availability, etc. Such generating stations shall be fully operated under guidelines of SLDC / RLDC / NLDC. Deviation caused on account of operation of hydro station (positive or negative) should be absorbed by State UI pool participants in pro-rata manner The Committee also suggested that existing contractual agreements between the Hydro power generating stations and the distribution companies (DISCOMs) should be respected. UI benefits should be passed on to the respective utility having its power purchase contract. Comments and Suggestions of Distribution Licensees & Petitioner BEST submitted that it has agreed with views and recommendations made by the Committee. RInfra submitted that in its view, decentralisation of scheduling and despatch may result in inability to reap benefits of the centralised despatch like optimal utilisation of State resources and optimisation of power purchase cost of the State as an entity. MSEDCL submitted that as Hydro power generating stations are expected to respond to grid frequency changes and inflow fluctuations. Therefore, MSEDCL submitted that in case of Hydro power generating stations, actual net energy supplied must be considered instead of penalising a State Pool Participant (SPP) for deviation from the schedule as per Indian Electricity GRID Code. TPC submitted that difficulty due to ramping up and ramping down rate would still prevail in the suggested mechanism, but the impact of ramping up and ramping down shall be borne by the DISCOM. MSLDC pointed out that as per recommendation of the Committee, even if backing down cannot be done owing to the ramping rate constraint, commercial settlement would take place based on UI rates at the prevalent frequency. Therefore, generators may bear the positive or negative impact As regards the control of Hydro power generating stations, TPC submitted that the schedule of hydro generation should also be decided by contracting DISCOM. Also, MERC, Mumbai Order in Case No. 56 of 2012 Page 10 of 35

11 TPC was not able to appreciate the method in which hydro stations would be controlled in a centralised manner. Commission s views The Commission acknowledges the fact that thermal power generating stations are observed to be higher on Merit Order Stack (MOS) for computation of MOD as per Intra-State ABT mechanism. It is of the view that Intra-State ABT mechanism fails to address the technical issue of ramping up / down of thermal power generating station which are high on the MOS Therefore, the Commission is of the opinion that variable cost may not be the sole criteria for despatch of power. The new Intra-State ABT mechanism would exhibit decentralised scheduling and despatch mechanism As regards the formation of a separate category for Hydro power generating stations controlled by MSLDC, the Commission is of the opinion that according to the Regulations of Indian Electricity Grid Code, MSLDC can avail services of Hydro power generating station under event situations during operation of MSLDC. It will also be incorrect to interfere with the commercial activity of scheduling power generated by a Hydro power generating station which has entered into a power purchase agreement with a DISCOM. The Committee also clarified that existing contractual agreements should be respected. The Commission shall consider this while formulating the new balancing and settlement mechanism. C. Surplus Scenario in winter Description of the issue MSLDC submitted that it was observed that State is left with some surplus power for a duration of five to six hours during the night period even after all generating stations are running at their technical minimum. This results in IEGC violation at high frequency even when all generators are backed down to their technical minimum owing to the unavoidable Round the Clock (RTC) purchase of power by utilities to meet peak demands. MERC, Mumbai Order in Case No. 56 of 2012 Page 11 of 35

12 3.28. MSLDC submitted that requirement and purchase of power by the utilities should be commensurate. DISCOMs must arrange resources in accordance with their individual load curve. Recommendation of the Study The Committee was of the view that DISCOMs enter into such arrangements due to lack of motivation for not deviating from the schedule for the benefit of the system The Committee highlighted that the frequency linked mechanism would resolve the issue in contention by bringing inherent linking with the system parameters like frequency. The Committee suggested that DISCOMs may also take up initiatives under demand side management schemes to shift the load patterns ensuring enough loads in night times. Generators may also try selling power at cheaper rates at off peak hours to ensure technical minimum load. The de-centralised scheduling mechanism may serve as a good platform for all such initiatives. Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC supported the recommendation of the Committee for decentralisation of scheduling process and submitted that the management of resources, i.e., scheduling would move from SLDC to DISCOMs. MSEDCL submitted that existing FBSM mechanism with modifications of allocation of State Unscheduled Interchange (UI) may be implemented. MSLDC pointed out that though the difficulty would be partially resolved as generators would reduce their generation due to lower UI rates. But the issue of RTC purchase would still be existing though the impact of the same would be taken up by the DISCOMs Commission s views The Commission is of the opinion that it is the responsibility of DISCOMs to meet the power demand across all the time blocks of the day. Such actions from DISCOMs affect operation of GRID and the system frequency The Commission acknowledges the recommendation of the Committee that the frequency linked mechanism may resolve the issue of surplus power scenario. In case of a frequency linked mechanism, the commercial implications of excess supply at MERC, Mumbai Order in Case No. 56 of 2012 Page 12 of 35

13 higher frequency will have to be borne by the DISCOM. Therefore, frequency linked mechanism may resolve the issue of procurement of surplus power. It also provides DISCOMs and Generating Companies an opportunity to manage their resources thus benefitting the system With respect to submission of MSEDCL, the Commission is of the view that existing Intra-State ABT mechanism would not be able to address this issue and deter DISCOMs from making such power purchases On the issue of RTC power which may get surplus even after the new frequency based mechanism is implemented, the individual DISCOMs may strategise to manage this through various options such as sale to other parties, banking with other parties/utilities, load shifting through Time of Day (ToD) tariff mechanisms, etc. Hence, such kind of efficient management of surplus power are prerogative of the individual DISCOMs. D. Consideration of Wind, Hydro and other Power Generators in Net UI-II Description of the issue MSLDC submitted that though Hydro power generating stations are scheduled on a day-ahead basis, they are operated in real time as per actual requirements. This contributes to the deviation from the schedule which is accounted for under UI-I and UI-II. Similarly, actual injection of the Wind Turbine Generators and other RE sources of electricity also contributes to the deviation in the system. But its impact is only borne by the SPP as per Intra-State ABT Order. Recommendation of the Study The Committee specified that under the existing scenario, the deviations are accounted for under UI-I and UI-II. The deviations caused by Renewable Energy (RE) power generation, affects State UI. The Committee specified that the current method of settling RE generation in DISCOM drawal is not appropriate It stated that the hydro stations should be treated in a completely different manner. For the promotion of RE energy, the power needs to be adjusted by the UI pool among all the pool members. MERC, Mumbai Order in Case No. 56 of 2012 Page 13 of 35

14 3.39. In case of frequency linked mechanism is being implemented, the amount of deviation due to the RE resources will be identified and will be absorbed by all pool participants. Under new Renewable Regulatory Fund (RRF) mechanism, RE resources may also be subjected to UI. The Committee suggested that the State may follow guidelines of CERC which outlines that RE generators would be subjected to UI beyond the permissible limits. Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC submitted that in case the Central Sector mechanism has to be implemented, then a scheme equivalent to RRF scheme has to be implemented in State too. MSLDC stated that these issues would not be faced in case a frequency linked mechanism is adopted. Commission s views As per the Para 4.9 (v) of Intra-State ABT Order, Net UI charges are divided into two parts Net UI-I and Net UI-II. Net UI-I constitutes deviations of the SPPs while NET UI-II constitutes deviation of Intra-State generators. But, as per the above referred Order, SLDC does not monitor schedule or despatch any OA Transaction below 50MW and any load connected below 132 kv Similarly, Hydro power generating stations are operated as per requirement on a realtime basis irrespective of their schedules, so as to control the State UI and power system requirements. A large variation in the actual injection of Wind Turbine Generators is also observed. Therefore, the Commission acknowledges the fact that as per existing Intra-State ABT mechanism, a large quantity of power is being injected into the grid within State limits which deviates substantially from their schedules The aggregation of all such deviations may lead to a larger deviation from the schedule owing to the members who are not part of SPP. These deviations are accounted as either UI-I or UI-II. The Commission admits that the State UI charges due to net impact of UI-I and UI-II are allocated among the SPPs though deviation is not being caused by them. MERC, Mumbai Order in Case No. 56 of 2012 Page 14 of 35

15 3.44. The Commission accepts that all members contributing to deviation in the system should be pool members. The new Intra-State ABT mechanism would check the practicability of including all such members as pool members and direct accordingly With respect to the issue of treatment of Hydro power generating stations, it may be noted that same has been discussed in other section of the present Order It may be noted that RRF is a complementary commercial mechanism created by CERC according to which, a renewable power generating unit is unaffected due to deviation from its schedule within permissible limits. On exceeding the permissible limit, the additional energy generated / energy deficit is charged at UI charges corresponding to the prevalent frequency The Commission acknowledges that implementation of such an arrangement may be a possible solution to the issue discussed. However, its implications on other aspects and analysis of the impacts need further analysis which is not available as yet. Therefore, it may be considered after carrying out analysis of the system for implementation in the Phase-I as mentioned in subsequent sections. E. State s Imbalance in the pool and its relation with net UI-I and UI-II deviations Description of the issue MSLDC through an illustration submitted that if the State overdraws by a certain quantum, the summation of the net UI-I and net UI-II should be equal to the quantum by which the State overdraws. But these two values are not found to be matching. This may be due to the failure to capture all the generating and consuming members in the SPP as per Intra-State ABT Order (Para 4.1.3). Therefore, any variation in their schedules is compensated by the SPPs. Thus, MSLDC submitted that the allocation of net UI charges being carried out as per FBSM may be reviewed. Recommendation of the Study The Committee highlighted that this issue occurs mainly due to large number of small generators which are neither a part of the day-ahead schedule or members of the pool nor accountable for deviations. MERC, Mumbai Order in Case No. 56 of 2012 Page 15 of 35

16 3.50. The Committee opined that such problems would be encountered until the deviation causing entities were not identified and made accountable. The Committee also suggested that the entities may not be necessarily charged for deviation but they may not be allowed to ignore accountability of such deviations. It also states that on implementation of frequency linked mechanism, the competition among generating stations would reach generators with smaller capacities. It also submitted that responsibility of scheduling the amount of energy by the generating station may be undertaken by the License Areas (DISCOMs) where the generating station is located. Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC submitted that this issue would be addressed by insisting on proper metering mechanism even for small generators. MSEDCL submitted that existing FBSM system for Intra-State ABT mechanism would be able to provide a solution to these problems after modification with respect to allocation of State UI. It also submitted that including CPPs may be considered for SMP calculations. MSLDC pointed out that there will be no such issue in case of frequency linked mechanism. Commission s views The Commission acknowledges point of view of the Committee for treatment of the issue and acknowledges the fact that even small generators should be required to install requisite meters, so that its deviations are tracked at MSLDC level or at Distribution Load Despatch Centre. This recommendation would be considered while framing the new balancing and settlement mechanism Issues regarding inclusion of as many members in the pool as possible have already been discussed in other parts of the present Order. As regards the submission of MSEDCL, it may be noted that the increase in the number of members in the pool for making modifications in allocation of State UI would further complicate the process. This is found to be an anomaly in the existing Intra-State ABT mechanism. Meanwhile, the Commission is of the opinion that adopting a frequency linked mechanism in line with the Inter-State ABT mechanism would simplify all the transactions. As regards its suggestion that RE Generators and CPPs may be included MERC, Mumbai Order in Case No. 56 of 2012 Page 16 of 35

17 in SMP calculation, it must be noted that as far as practically possible, the new Intra- State ABT mechanism would address it. F. Treatment of Open Access Generators frequently changing the status between Inter-State / Intra-State transactions Description of the issue MSLDC stated that at present, following generators are treated as SPP in the Pool: A. Generators engaged in Inter-State STOA Transactions B. Generators having multiple transactions (including Captive Wheeling) on an Intra-State basis But it is observed that a few generators change their status frequently. For example, a generator normally selling to MSEDCL in STOA goes for Inter-State sale or sale in power exchange because MSEDCL does not require power on Sundays A Generator engaged in Inter-State Open Access transaction is considered to be a SPP while Intra-State power transaction does not entail inclusion in the SPP. As stated in the example, status of some generating stations change frequently. MSLDC requests the Commission to provide guidance on treatment of the same. Recommendation of the Study The Committee opined that non-pool members in present framework are not charged for deviations and all such deviations are absorbed by pool participants. Although, such generators are operated as per instructions of MSLDC, they may or may not contribute whenever required as no commercial incentive or penalty is involved. As the quantum of these deviations can be large, their allocation onto SPPs may be reviewed The Committee also submitted that SLDC in present status does not have information of all generating stations connected to the grid (including small generating stations). Hence, the decisions of SLDC may not be optimal. MERC, Mumbai Order in Case No. 56 of 2012 Page 17 of 35

18 Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC submitted that there will be no such issue in case of frequency linked mechanism. MSLDC pointed out that under frequency linked mechanism, all generators under Long Term Open Access (LTOA) and STOA would be SPP and would be subjected to UI Charges. Commission s views The Commission acknowledges point of view of the Committee for treatment of the issue. The Commission observes that under the frequency linked mechanism, generation from such plants would be accounted for in balancing and settlement mechanism and any deviation would attract UI charges. Therefore, the Commission is of the view that migration to a new Intra-State ABT mechanism would resolve this issue. G. Allocation of Additional UI (Penal UI Charges for frequency below 49.7 Hz) which cannot be claimed in ARR Description of the issue Under critical situations when frequency is lower than 49.7 any State which overdraws by 12% or by 150MW (whichever is lower) is subjected to UI Charges which are not qualified to be claimed in the ARR as per Regulation 7 of CERC (Unscheduled Interchange charges and related matters) Regulations, While allocating such UI Charges to the SPPs, MSLDC charges the SPPs in proportion to their net UI Charges and not in terms of increment / decrement to the State pool. MSLDC submitted that in view of RInfra, the said UI charges should be allocated on the basis of increment / decrement to the State pool The MSLDC have submitted that centralised scheduling and despatch is carried out with an impetus on economic despatch. Sometimes, generation stations are backed down owing to their high variable costs. If the system frequency falls below 49.7, overdrawal by a DISCOM is penalised by an amount which cannot be included in ARR. Under such circumstances, if the DISCOM who s capacity is backed down by the MSLDC overdraws even marginally, it bears the penalty for overdrawal at low MERC, Mumbai Order in Case No. 56 of 2012 Page 18 of 35

19 frequency. Therefore, such DISCOMs are penalised for overdrawal even when their capacity is backed down by MSLDC. Therefore, MSLDC requests the Commission to guide it. Recommendation of the Study The Committee opined that UI due to non-pool members may reflect in net UI for the State at Regional Level. Most of these generating stations are embedded into MSEDCL system, thereby creating large deviations from the schedule for the MSEDCL. Therefore, until the deviation causing entities are subjected to UI, any mechanism would face this problem. In case that the non-pool member is not identified, it will affect the UI of the embedding utility. Therefore, it would be important that sufficient infrastructure is provided before connecting to the grid for exchange of power. Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC submitted that there will be no such issue in case of frequency linked mechanism. MSLDC submitted that under frequency linked mechanism, possibility of State UI charge not being allocated to any SPP or any particular SPP being charged exorbitant rate in some time blocks is less. Commission s view The Commission acknowledges point of view of the Committee for treatment of the issue. The Commission also acknowledges the need of all generating companies installing requisite meters so that their consumptions are monitored. This recommendation would be considered while framing the new balancing and settlement mechanism. MERC, Mumbai Order in Case No. 56 of 2012 Page 19 of 35

20 H. Sharing of TPC Generation between TPC-D and BEST Description of the issue MSLDC submitted that share of BEST and TPC-D in TPC-G generation as approved by the Commission latest by its Order dated September 8, 2010 in Case No. 96 of 2009 for approval of APR of TPC-G are 51.17% share for BEST and 48.83% share for TPC-D is according to their EPAs. TPC ends up decrementing to the pool while BEST ends up incrementing the pool on a frequent basis. Therefore, costly power sourced by BEST enters the pool, thereby escalating the pool cost (System Marginal Price also referred to as SMP ) Recommendation of the Study The Committee specified that the principle of State MOD prescribed by the Commission needs MSLDC to schedule surplus power available with the Pool Participant(s) to the extent of shortfall of other State Pool Participants. Thus, deficit utilities are required to absorb the available surplus power at SMP of the surplus utility even though they have not contracted for the same, unless they manage to otherwise match their demand and availability. The deficit utility is consulted or asked for its willingness for the same. The present methodology of sharing TPC generation is based on approved % basis. Thus, irrespective of whether TPC-D or BEST requires additional generation to match their Demand Supply on real-time basis, actual TPC generation is allocated to them on approved % basis, which may become surplus. In many cases, due to this kind of sharing, surplus power is available with BEST in real-time, and is by default injected into the pool thereby inflating SMP of the pool. The Committee submitted that this is one of the loopholes in FBSM mechanism. It mentions that the principle of achieving economic despatch is defeated by allowing costlier power into the pool The Committee also submitted that de-centralized scheduling is expected to avoid all such problems as it is purely based on willingness of the participants, subject to contractual agreements. Further, the process will not lead to a situation against natural justice and blame game will be totally avoided. MERC, Mumbai Order in Case No. 56 of 2012 Page 20 of 35

21 Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC submitted that there will be no such issue in case of frequency linked mechanism as generation would not be allocated to a DISCOM but would have to be scheduled by the DISCOM. MSLDC submitted that under frequency linked mechanism, this problem would not arise and that any DISOCM contracting the said power would bear the impact of UI on the basis of frequency. Commission s views The Commission acknowledges point of view of the Committee for treatment of the issue. The Commission is of the view that in a frequency linked mechanism, Generating Station would be providing its generation availability schedule. In case that the station deviates from the schedule, UI rates corresponding to the prevalent frequency shall be charged. Therefore, this issue gets addressed under the new balancing and settlement mechanism. I. Metering of Unit-wise ex-bus injection Description of the issue MSLDC submitted that it is not possible to measure unit-wise ex-bus generation, as auxiliary consumption is commonly shared by generating units in a generating station through Station Auxiliary Transformers owing to their location in the network. STOA contracts may not be unit wise. There can also be a possibility of a merchant generating station selling a fraction of total installed capacity. MSLDC was of the view that under such circumstances, classifying generating station in order to determine its treatment as an SPP becomes difficult. There is no need to measure unit wise ex-bus injection for a station because of the trend of merchant generators to enter into part capacity contracts. MSLDC also suggested that methodology of ISGS stations to measure total injection into the grid may be adopted. Recommendation of the Study The Committee submitted that this problem is independent of balancing and scheduling mechanism. It also states that till the time unit-wise metering is achieved, proper mechanism (with approximation) is necessary. In de-centralized scheduling MERC, Mumbai Order in Case No. 56 of 2012 Page 21 of 35

22 mechanism, schedule would be prepared for individual units. This methodology is successfully running for more than a decade. Implementation of similar scheduling process might resolve the issues. Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC submitted that there will be no such issue in case of frequency linked mechanism. MSLDC submitted that under frequency linked mechanism, if the entire plant is treated as one generator similar to ISGS in CERC mechanism, this problem would not arise as only injection in to the grid would be metered. Commission s views The Commission is of the view that the issue expressed by MSLDC is independent of the kind of balancing and settlement mechanism being adopted. The concern is appropriateness of metering. The Commission acknowledges point of view of the Committee and MSLDC for treatment of the issue. It is of the opinion that metering should be as per the mechanism described in the Committee report. However, the final decision on implementation shall be taken after due analysis at the time of implementation of Phase-I. During such implementation, infrastructural issues regarding the readiness depending on the existing metering locations may also be encountered. This issue can be taken up in the Phase-I of implementation during which the readiness of the power plants can be checked for being in line with the requirement as discussed above. However, the nuances of the mechanism may be further analysed for appropriateness before reaching to conclusion. J. Difference in rates of UI at regional level and Intra-State Weighted Average System Marginal Price (WASMP) Description of the issue MSLDC reiterated that UI at the regional level is linked to the grid frequency. The UI rates in Maharashtra are linked to SMP and not grid frequency. The System Marginal Price varies according to cost of generation of all the generating stations in the State whereas UI rates as notified by CERC are subject to change as per Regulation 6 of the CERC (Unscheduled Interchange charges and related matters) (Second Amendment) MERC, Mumbai Order in Case No. 56 of 2012 Page 22 of 35

23 Regulations, Therefore, UI rates at the region level and that in Maharashtra would always be different. Now, under FBSM, if a utility involuntarily ends up consuming more power and decrementing the pool, it has to pay the generating company incrementing the pool at SMP. This case is equivalent to a situation where the DISCOM ends up getting power from a generating company at its rate of generation, i.e., getting a share of its generation without getting into a contract with the generating company. Therefore, DISCOM decrementing the pool has no control over the power and the corresponding rate at which it would be receiving power. Therefore, making an MOD becomes difficult as decisions have huge financial impacts MSLDC also highlighted the anomalies in the existing Intra-State ABT mechanism wherein, sometimes, the imbalance charges are found to be exponentially high while some times found to be lower than the generation cost. The incongruity can be associated to the variation between WASMP and State UI rate that is linked to the Frequency. Recommendation of the Study The Committee reiterated that WASMP is not based on frequency and State UI has to be regulated in FBSM. It submitted that due to the responsibility of minimising State UI and the responsibility of operating the system in most economic mode, the system operators faces numerous issues. But, as per FBSM, in cases where cheaper power is available outside the State, the State ends up procuring costlier power which has already been scheduled on day-ahead basis and any variation would result in the SPP being eligible for SMP. Similar other complexities result into dilution of the economic despatch which is anticipated in day-ahead schedule. The problem is aggrieved due to difference in view points and business interest of utilities in Maharashtra. The concept may work in power surplus scenario where competitive rates are available within the State which are lower than power available in Inter-State pool. However, the same is not expected in near future The Committee opined that, implementation of frequency linked mechanism shall resolve the issue. There is little hope of fixing the same in FBSM as the prices MERC, Mumbai Order in Case No. 56 of 2012 Page 23 of 35

24 discovered on a day-ahead basis would always be higher than cheaper power available in Inter-State pool above 50 Hz. Comments and Suggestions of Distribution Licensees & Petitioner BEST agreed with the views and recommendations of the Committee. TPC submitted that there will be no such issue in case of frequency linked mechanism. MSLDC submitted that no such problem would be faced under frequency linked mechanism. Commission s view The Commission acknowledges point of view of the Committee for treatment of the issue. A mechanism similar to the Inter-State ABT mechanism envisages a frequency based UI rate for the deviations in schedule. Therefore, there would be parity in the UI rates and mechanisms with the Inter-State ABT mechanism. The only difference in the mechanism would be for customization requirement of various issues. This difference on account of customization may be analysed in the Phase-II of the roadmap specified by the Commission and safeguards in this regards would need to be built in. This recommendation would be considered while framing the new balancing and settlement mechanism. K. Migrated Consumers of RInfra and TPC-D Description of the issue MSLDC submitted that block wise data of consumers migrated from RInfra to TPC-D is not available for billing as these consumers are connected at low voltage. But the Commission has directed in clause No. 1.6 and Point No.11 (v) in Order dated 15 October, 2009 in Case No. 50 of 2009 that block wise metering of migrated consumers is required for accounting of the energy in FBSM. The monitoring of actual consumption cannot be accurately monitored on SCADA as the measurement happens at 22kV side and real time monitoring may become inaccurate by MW MERC, Mumbai Order in Case No. 56 of 2012 Page 24 of 35