REGULATORY NEWS 2. MERC issues Suo-Moto order on RPO verification and compliance for Captive (CPP) and Open Access (OA) consumers

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1 AUGUST 2013, ISSUE 67 Bulletin News and Information In this Issue REGULATORY NEWS 2 CSERC issues tariff order for CSPGCL, CSPTCL & CSPDCL for FY DERC issues tariff order for BRPL, BYPL, TPDDL, NDMC and DTL CERC issues second amendment to the REC regulations HERC issues draft amendment to the Open Access regulations MERC issues Suo-Moto order on RPO verification and compliance for Captive (CPP) and Open Access (OA) consumers APERC issues draft proposal for determining the methodology of cross subsidy APERC lifts R & C measure w.e.f 1 st August, 2013 INDUSTRY NEWS 5 Power Market Update July 13 49% FDI approved in power exchanges through automatic route FOCUS OF THE MONTH 7 Deviation Settlement Mechanism RENEWABLE NEWS 8 REC Market Update July 13 Wind Power generators files petition in Delhi high court against CERC order on RRF mechanism INTERNATIONAL NEWS 8 FTR Auctions market commences in New Zealand IEX TRADE INFO JULY 13 9

2 REGULATORY NEWS CSERC issues tariff order for CSPGCL, CSPTCL & CSPDCL for FY On 12 th July, 2013, CSERC issued joint tariff orders for CSPGCL, CSPTCL & CSPDCL for FY The key highlights of the order are as follows: HT Industrial Tariff: No change in the tariff structure from the previous orders. The tariff for HT consumer category is as below: HT Consumer category HT 1.1 & 3.1 Steel Industries and other industries at 33 KV HV-1.2 & 3.2 Steel Industries and other industries at 11 KV HV-2.1: Mines and Cement Industries at 33 KV HV-2.2: Mines and Cement Industries at 11 KV Demand Charge (`/kva/month) Demand Charge (`/kwh) Short-Term Open Access Charges (Transmission): ` per kwh Energy losses for transmission: 4.40% Source: CSERC Website DERC issues tariff order for BRPL, BYPL, TPDDL, NDMC and DTL On 31 st July, 2013, DERC issued a tariff order for FY for Discoms in its area. The key highlights of the order are as below: HT Tariff: Tariff increased by 5% for all DISCOM consumers Tariff Non-Domestic High Tension (NDHT)* For supply at 11 kv and above (for load greater than 108 kva) Fixed Charges (`/kva/ month) Energy Charges (Paisa/ kvah) Large Industrial Power (LIP) (Supply at 11 kv and above) Fixed Charges (`/kva/ month) Energy Charges (Paisa/ kvah) BRPL BYPL TPDDL NDMC Losses and Charges DTL - intra-state transmission losses : 1.21% Wheeling Losses and Charges -- Above 66kV: Zero for all except TPDDL i.e. ` 0.67/kWh -- At 33kV/66kV: Wheeling charge Ranges from ` 0.61/unit to ` 0.68/unit Wheeling loss Ranges from 0.90% % -- At 11kV: Wheeling charge Ranges from ` 0.63/ unit to ` 0.71/unit Wheeling loss Ranges from 2.00% % Power Purchase through Short Term: The Commission has directed BRPL, BYPL and TPDDL to restrict the cost of power procured through short term contracts at ` 5 per kwh The Commission has also directed BRPL and BYPL to become a Trading Member of IEX and purchases on exchange shall not be made through any related party / trader 2

3 Approved power purchase for RPO: Non-Solar Power (MU) Non- Solar RECs (MU) Solar Power (MU) Solar RECs (MU) Time Period Time period for issuances of certificate is increased to 6 months from the date of generation Validity period for certificates issued is seven hundred and thirty days from the date of issuance BRPL BYPL TPDDL NDMC Source: DERC Website The word preferential tariff is removed from the regulations and hence procurement through competitive bidding is also recognized Source: CERC Website CERC issues second amendment to the REC regulations On 10 th July, 2013, CERC notified the 2 nd amendment to the CERC (Terms and Conditions for recognition and issuance of Renewable Energy Certificate for Renewable Energy Generation) Regulations, Some of the key amendments are summarized below: Eligibility: Selling of electricity component by Renewable Energy (RE) Generator to discom should be at the pooled cost of power purchase instead of price not exceeding pooled cost of power purchase Electricity Duty (ED) has been withdrawn as a promotional benefit in the provision A CGP (Captive Generating Plant) will become eligible for participation in the REC scheme after 3 years of forgoing the benefits of concessional transmission and wheeling charges/ or banking facility RE generator is eligible for REC if it does not sell electricity generated from the plant, either directly or through trader, to an obligated entity for compliance of the RPO by such entity Self Consumption/Retention of RECs RE generator including CGP is now permitted to retain the certificates for offsetting its own RPO as a consumer, subject to certification and verification by the concerned State Agency but this exemption does not exist for its group companies HERC issues draft amendment to Open Access regulations HERC has proposed draft amendments to its Terms and Conditions for grant of connectivity and open access for intra-state transmission and distribution system Regulations, The key highlights of the proposed amendment are as follows: Eligibility to avail Open Access (OA): Power availed through OA shall not be less than 20% of the contract demand of the consumer or 500 kw whichever is higher Conditions for Day-Ahead Transactions by Embedded consumer through Exchange: Consumer to submit schedule of power through OA to Discom for all slots at 10:00 AM of D-1 (Delivery-1) The submitted schedule will be considered as a confirmed schedule for working out the slot-wise admissible drawl of the consumer from the licensee with reference to his sanctioned contract demand (Contract demand Schedule through O.A = Admissible drawl from Discom) Deviation Settlement Over drawl: if recorded drawl > 5% of admissible drawl, pay 25% of the consumption charges for the total energy drawl during the month including the energy drawl through open access Under Injection by Generator: UI charges or highest tariff including FSA and PLEC, whichever is higher 3

4 Under drawl by Consumer / Over Injection by Generator: -- Charge paid to consumer only in case of nonavailability of network or unscheduled load shedding -- No charges paid to generator beyond 10% of scheduled injection in a time-slot or beyond 3% of scheduled injection on aggregate basis for all the 96 time - slots in a day -- OA consumer / Generator paid by Discom, whichever is the lowest out of the three: UI charges; lowest tariff for the relevant FY for any consumer category (excluding agriculture power supply); or power purchase/sale price contracted by the consumer/generator Source: HERC Website MERC issues Suo-Moto order on RPO verification and compliance for Captive (CPP) and Open Access (OA) consumers On 22 nd July, 2013, MERC issued suo-moto order suggesting good practices on RPO Monitoring, Reporting and Verification (MRV) to be followed in Maharashtra for tracking RPO Compliance by CPP and OA Consumers in the State. As per the order, MERC has directed: Constitution of a Working Committee to formulate the mechanism for monitoring, verification and compliance of RPO for OA & CPP and MEDA to report its formation and further developments thereon before 30 th September, 2013 In view of the difficulties faced owing to lack of appropriate mechanism, no regulatory charges shall be applicable on CPP and OA Consumers for nonfulfillment of RPO targets during FY 11, FY 12 and FY 13, provided that the same shall be fulfilled on a cumulative basis before 31 st March, 2014 MEDA to submit quarterly status to the Commission in respect of compliance monitoring of RPO by the Obligated Entities Source: MERC Website APERC issues draft proposal for determining the methodology of cross subsidy APERC proposed draft methodology of Cross Subsidy and levy of cross subsidy surcharge for the year vide its public notice dated Due to concerns expressed by various stakeholders against the embedded cost methodology adopted for determination of cross-subsidy, the Commission considered that there is a need for extensive public process of hearing on two available methodologies (a) National Tariff Policy and (b) Embedded Cost Method. However DISCOMs in their ARRs, have requested for determination of cross-subsidy surcharge based on the National Tariff Policy guidelines. The proposal provisionally determines CSS on both methodologies and seeks comments from stakeholders. Source: APERC Website APERC lifts R & C measure w.e.f 1 st August, 2013 In its order dated 31 st July, 2013, APERC removed the existing order on Restriction and Control measures with effect from , considering representation of APPCC that an additional power of 1100 MW from hydel station is available from 31 st July, Source: APERC Website 4

5 INDUSTRY NEWS Power Market Update July 13 With the advancement of monsoons, the overall power supply and demand condition eased in the country. However, the exchange experienced increased demand vis-à-vis last month in terms of purchase bids received in the Day-Ahead Market. The prices on the other hand remained attractive owing to the excessive supply at the exchange. Notably, the price for power on a few occasions even dropped to as low as ` 0.99 per unit with an exception of the Southern region and the State of Punjab. On an average, the prices in the Southern Region remained below ` 5.00/unit and below ` 2.00/unit for rest of India except Punjab where the average price hovered around ` 7.54/unit. The total cleared volume for the month of July was 2264 MUs, higher than last month when around 2114 MUs were cleared. Around 500 MUs were lost due to congestion in the transmission network which restricts the flow of electricity from one region to another. The average participation at the exchange for the month of July was 1306 participants. VOLUMES: Total purchase bids received in the DAM for the month of July 13 was at 2925 MUs, whereas the sell bids were at 4771 MUs indicating 63% more supply at the exchange. The average daily cleared volume was 73 MUs, higher than 70 MUs in the month of June 13. Area wise total cleared sell and buy volume in the DAM is represented in the table below: Evidently, for the month of July, the regions of North-East, East and North were the net sellers of electricity whereas Western and Southern region were the net buyers. This trend has reversed for the regions of North and West as compared to last month where Northern region was the net buyer and west was the net seller of power. The volumes traded through Punjab have declined greatly owing to the absence of corridor available for short term transaction via the exchanges as the state has tied its short term capacity in bilateral agreements leaving limited network for transactions through the exchange. PRICES: The prices at the exchange continued to remain low as a result of excessive supply. However, as compared to last month the average prices have risen slightly with the average unconstrained market clearing price for July 13 Average Prices (`/kwh) Bid Area Change July'13 June'13 (%) North-East (A1,A2) % East (E1,E2) % North (N1,N2) % Punjab (N3) % South (S1) % South (S2) % West (W1,W2,W3) % MCP* % * MCP: Market clearing price refers to the price discovered before accounting for any congestion in the transmission corridor Area wise total cleared sell and buy volume in the DAM REGION BUY (MU) SELL (MU) July '13 June '13 Change (%) July '13 June '13 Change (%) NET North East % % SELL East % % SELL North % % SELL Punjab % % BUY West % % BUY South % % BUY 5

6 at ` 2.28/unit, 2.4% higher than last month. There was no change in the average prices for North-East from last month although the prices in South (S2) showed an increase of 17% with average price touching ` 5.19/unit. The prices in Punjab showed steep rise as a result of unavailability of transmission network required to facilitate inter-state trade. Therefore, the trade during the month was majorly intra-state in nature i.e. within Punjab. 49% FDI approved in power exchange through automatic route On 16 th July, 2013, in a high-level meeting, chaired by the Prime Minister, FDI limit in Power Exchanges has been raised to 49% and with approvals through Automatic route, which was earlier to be approved by the Foreign Investment Promotion Board (FIPB). Automatic approval is available through Reserve Bank of India, a company is only required to report to RBI within 30 days of receipt of foreign equity or allotment of shares. For more details: EVENTS Confederation of Indian Industry National Committee on Power 25 th June, New Delhi Mr. Rajesh K. Mediratta, Director (BD) attended the conference Confederation of Indian Industry 12 th Green Power, th -28 th June, Hyderabad Ms. Shruti Bhatia, Vice President (Policy and Communications) delivered a presentation on Renewable Energy Certificate Market Evolving Thought Leadership On Green CSR Interventions 9 th July, New Delhi Mr. Rajesh K. Mediratta, Director (BD) attended the conference and delivered a presentation on CSR through Voluntary REC Market Managing Cost of Energy 25 th July, New Delhi Mr. Rajesh K. Mediratta, Director (BD) attended the conference and delivered a presentation on Options in the Energy Trading Market Round Table on Power 26 th July, Baroda Mr. Rajesh K Mediratta attended the conference as a panelist on Accessing cheaper power through open access 6

7 FOCUS OF THE MONTH Deviation Settlement Mechanism Deviations from the scheduled generation and drawl of electricity lead to large fluctuations in frequency and thereby impact the whole grid. In India, before the introduction of Availability Based Tariff regime (ABT), these fluctuations in the frequency and voltage were common due to absence of checks on the generators who pumped in electricity in the grid irrespective of the grid frequency which resulted in frequent grid disturbances. With the introduction of ABT mechanism, a three part tariff structure was introduced wherein apart from fixed and energy charges, charges for deviations from the commitment (schedule) was included in the form of an Unscheduled Interchange (UI) Mechanism. The IEGC regulations specifies the operating band of grid frequency and CERC in the past has narrowed down this permissible frequency range from time to time to further improve grid stability and strengthen the security. Different UI charges are applicable on deviations from the schedule based on the prevailing system frequency within and beyond the specified frequency range. These rates are higher when the frequency is lower and low when the frequency is high. The rationale is to reward or penalize the grid connected entities in case of deviations from schedule based on the frequency of the grid. This mechanism was conceived as a real-time balancing mechanism to improve grid discipline and introduce accountability on various grid connected participants. The two major grid disturbances on 30 th and 31 st July, 2012 forced the Central Commission to take steps to further improve the grid security. As a result, on 20 th June, 2013, CERC issued notification on draft CERC (Deviation settlement mechanism and related matters) regulations, In the proposed regulations, CERC has plans to further narrow down the frequency band to Hz Hz so that the system operates close to 50 Hz. The key features of the draft are highlighted below: The draft regulation proposes to adopt this new regulation and repeal CERC (Unscheduled Interchange charges and related matters) Regulation, 2009 DEVIATION CHARGES: Charges for deviation shall be worked out on the average frequency of a timeblock at the rates specified below: Average Frequency of the time block(hz) Charges for Deviation Below Not Below Paise/kWh DEVIATION CAP RATES: The draft proposes cap rate on charges for deviation which should not exceed Paise/kWh for all generating stations using coal/lignite/gas supplied under APM as fuel and unscheduled interchange for under-drawl and overinjection. VOLUME DEVIATIONS: The draft also proposes to put strict volume limits on over/under drawl and over/ under injection irrespective of the grid frequency as per the following: Additional Charges for Frequency Deviation at Hz and above Additional charge will be the specified percentage of deviation charge corresponding to frequency below Hz on crossing the volume limit as specified below Deviation Volume In a time block Additional Deviation Charge 20% 40% 100% > 12% - > 15 % - > 20 % or 15% or 20% or >150 MW MW > 200 MW MW > 250 MW Over the day > 3% - 4% > 4% - 5% > 5% Additional charges for Frequency deviation below Hz Additional charge equivalent to 100% of the charge for deviation of Paise /kwh corresponding to the grid frequency of below Hz will be applicable. 7

8 RENEWABLE NEWS REC Market Update: July 13 The fourth Renewable Energy Certificate (REC) trading session of FY 14 held on 31 st July, 2013, at IEX featured trade of 72,321 N-Solar and 1,983 Solar RECs. This trading session witnessed increased volumes of traded RECs over the previous months, however the demandsupply imbalance still remains with supply far exceeding demand. For non-solar RECs, buy bids of 72,321 RECs and sell bids of 16, 76,875 RECs were received against which 72,321 were cleared at ` 1,500 per REC. For solar RECs, buy bids of 1,983 RECs and sell bids of 12,486 RECs were received against which 1,983 RECs were cleared at ` 9,300 per REC. This trading session featured 770 market participants of which 610 participated in non-solar segment while 160 participated in the solar segment. On an overall basis, a total of 1877 participants are registered in REC segment at IEX. Of this, 467 are eligible entities (RE generators) 1397 are obligated entities (Discoms, Open access consumers & Captive generators) and 13 are registered as voluntary entities. Non-solar REC Solar REC Trade Volume (REC) 72,321 1,983 Sale bid (REC) 16,76,875 12,486 Purchase Bid (REC) 72,321 1,983 Price discovered (Rs/REC) 1,500 9,300 No. of participants An overview of participation in the REC Market at IEX as on 31 st July 13: Total number of registered participants 1,880 Obligated Entity 1,397 DISCOMs 26 Open Access consumers 1301 Captive Consumer 70 Voluntary 13 Eligible Entity (Private Generators) 467 Highest participation in a session (March 13) 1,135 Wind Power generators files petition in Delhi High Court against CERC order on RRF mechanism The Wind Independent Power Producers Association has filed a petition with the Delhi High Court against the CERC, over the Commission s recent scheduling and forecasting order. The order asks wind power generators to forecast their generation for the next day, for every 15 minute interval and face penalty if the actual generation is 30 percent more or less than the submitted forecast. Some wind generators fear that the penalties beyond +/- 30% would eat away 12-15% of the companies profits, while some other in the industry feel that the impact will not be that severe, as the mechanism allows power producers to change their schedule as many as eight times during the day. international NEWS FTR Auctions market commences in New Zealand The Electricity Authority of New Zealand has finally given a go ahead to introduce FTR (Financial Transmission Rights) in New Zealand. The Authority s objective in introducing a market in FTRs is to promote competition in the electricity industry for the long term benefit of consumers. FTRs are believed to provide all participants in the energy market, a tool for managing exposure to the price impact of transmission constraints. The Energy Market Services (EMS) has been appointed by the Electricity Authority as the FTR Manager Service Provider with the NZX acting as the clearing agent. The initial project involved implementing a system to auction Financial Transmission Rights for the electricity market. The market system went live on 23 rd May, 2013, with the first FTR auction on 12 th June, 2013 with eight companies bidding for cover over the price difference between Otahuhu in Auckland and Benmore in the South Island over one calendar month. For more details: 8

9 IEX TRADE INFO - JULY 2013 DAY-AHEAD MARKET MONTHLY PRICE SNAPSHOT MAXIMUM MCP ` 2.97/kWh MINIMUM MCP ` 1.7/kWh AVERAGE MCP ` 2.28/kWh Prices (`/kwh) Area Min Max RTC* (0-24 hr) Peak* (18-23 hr) Non Peak* (1-17 & 24 hr) Night* (1-6 & 24 hr) East North East North(N1/N2) North(N3) West South(S1) South(S2) * Simple Average of Area Clearing Prices for specified duration of time MONTHLY VOLUME SNAPSHOT VOLUMES Unconstrained Volume Cleared Volume Purchase Bids Sell Bids Average Daily Volume Cumulative Cleared Volume (MU) Total Volume (MUs) Average Daily (MW) 2,720 3,656 2,264 2,925 4,771 3,043 3,932 6, MUs 9,393 For the FY 14 PARTICIPATION SNAPSHOT (as on 31 st July 13) TOTAL REGISTERED PARTICIPANTS OPEN ACCESS CONSUMERS PRIVATE GENERATORS HIGHEST PARTICIPATION 2,258 2, , nd June,'13 9

10 Daily Price & Volume Trend Average Hourly Market Clearing Volume and Price for the month CONGESTION PROFILE - JULY 2013 Price Difference (` /kwh) Corridor revised due to shutdown of Balipara-Bongaigaon I 01/07/13 02/07/13 03/07/13 04/07/13 05/07/13 06/07/13 07/07/13 08/07/13 09/07/13 10/07/13 11/07/13 12/07/13 13/07/13 14/07/13 15/07/13 16/07/13 17/07/13 18/07/13 19/07/13 20/07/13 21/07/13 22/07/13 23/07/13 24/07/13 25/07/13 E NE 26/07/13 27/07/13 28/07/13 29/07/13 30/07/13 31/07/13 Price Difference (` /kwh) 0.25 E N /07/13 02/07/13 03/07/13 04/07/13 05/07/13 06/07/13 07/07/13 08/07/13 09/07/13 10/07/13 11/07/13 12/07/13 13/07/13 14/07/13 15/07/13 16/07/13 17/07/13 18/07/13 19/07/13 20/07/13 21/07/13 22/07/13 23/07/13 24/07/13 25/07/13 26/07/13 27/07/13 28/07/13 29/07/13 30/07/13 31/07/13 Price Difference (`/kwh) 0.45 South Import /07/13 02/07/13 03/07/13 04/07/13 05/07/13 06/07/13 07/07/13 08/07/13 09/07/13 10/07/13 11/07/13 12/07/13 13/07/13 14/07/13 15/07/13 16/07/13 17/07/13 18/07/13 19/07/13 20/07/13 21/07/13 22/07/13 23/07/13 24/07/13 25/07/13 26/07/13 27/07/13 28/07/13 29/07/13 30/07/13 31/07/13 Price Difference (`/kwh) 7 S1 S /07/13 02/07/13 03/07/13 04/07/13 05/07/13 06/07/13 07/07/13 08/07/13 09/07/13 10/07/13 11/07/13 12/07/13 13/07/13 14/07/13 15/07/13 16/07/13 17/07/13 18/07/13 19/07/13 20/07/13 21/07/13 22/07/13 23/07/13 24/07/13 25/07/13 26/07/13 27/07/13 28/07/13 29/07/13 30/07/13 31/07/

11 TERM AHEAD MARKET SNAPSHOT CONTRACTS TOTAL VOLUME (MWh) MAX PRICE (`/kwh) MIN PRICE (`/kwh) Weekly Intraday 15, Day-Ahead Contingency 2, Daily REC MARKET SNAPSHOT Trade Session on 31 st July, 2013 REC PURCHASE BIDS SELL BIDS CLEARED (REC) PRICE (`/REC) Non Solar 72,321 16,76,875 72,321 1,500 Solar 1,983 12,486 1,983 9,300 Source wise RE capacity (MW) State wise RE capacity (MW) Wind Biomass Solar PV Bio-fuel cogeneration Small Hydro Others Tamil Nadu Uttar Pradesh Karnataka Andhra Pradesh Maharashtra Gujarat Rajasthan Madhya Pradesh Chhattisgarh Punjab Others 11

12 FEEDBACK FOR THE MONTH IEX team is doing a commendable job.your bulletin keeps me updated. My all good wishes! S M Sahay Former Chairman & Member, BERC Dear IEX Team, Thanks for providing the updates of power sector on regular basis, it always proves to be very useful. Regards, Amit Joshi Asst. Manager Commercial Department, Greenko Group Dear Readers, We thank you for your encouraging response and support towards the IEX bulletin. In our effort to make this bulletin even more informative, we request you to kindly mail us your suggestions and valuable feedback on: shilpy.dewan@iexindia.com or alternately you could also write in to us at our corporate address given below. Warm regards, Team IEX RENEWABLE ENERGY CERTIFICATES For details iex-bd@iexindia.com Free registration for voluntary buyers Buy RECs - Be Green 12 in this bulletin. Indian Energy Exchange Ltd. Corporate Office: 100A/1 Ground Floor, Capital Court, Olof Palme Marg, Munirka, New Delhi , India. Tel No.: Fax No.: Registered Office: 1st Floor, Malkani Chamber, Off Nehru Road, Vile Parle (E), Mumbai Disclaimer The information featured in this bulletin has been compiled from sources deemed reliable and to the best of our knowledge. Whilst every effort has been made to ensure the accuracy of the information, IEX will not be held responsible for any errors or omissions neither will it be liable for damages nor losses suffered, personal or otherwise, due to the information contained