Thursday 14 March 2019

Overview of Availability Based Tariff (ABT) Meters

Availability Based Tariff (ABT) is a frequency based pricing mechanism applicable in India for unscheduled electric power transactions.

ABT Mechanism in Electricity sector in India is adopted since the year 2000 and in a few other countries for pricing bulk power across various stakeholders. 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 was initially made applicable to only central generating stations having more than one SEB/State/Union Territory as its beneficiary. Through this scheme, the Central Electricity Regulatory Commission (CERC) looks forward to improve the quality of power and curtail the following disruptive trends in power sector:

Unacceptably rapid and high frequency deviations (from 50 Hz) causing damage and disruption to large scale industrial consumers Frequent grid disturbances resulting in generators tripping, power outages and power grid disintegration.

The ABT scheme has now been expanded to cover the Intrastate systems as well. The power generation or grid capacity has increased substantially in last fifteen years particularly after the Electricity Act 2003 by introduction of competition and un-bundling of vertically integrated utilities (SEBs) into separate entities in charge of electricity generation, electricity transmission, and electricity distribution. Deregulation and competition has facilitated participation of private sector on large scale in electricity generation, transmission and distribution. Of late, Indian electricity sector is transforming from perennial deficit to surplus electricity availability. The volume of purchased electricity that could not be transmitted to the buyers due to transmission lines congestion is only 0.3% of the total electricity consumed in the financial year 2013-14. It means that the actual power deficit in India is less than 1% excluding under priced electricity demand. ABT/DSM mechanism needs improvements to address the requirements of all stake holders (including final electricity consumers) for encouraging least cost electricity generation / tariff based on demand verses availability in the grid. There is a need of well represented Electric Reliability Organization to involve all the grid participants for framing guidelines for power system operation and accreditation which is presently looked after by the CEA

Bulk power purchasers can buy electricity on daily basis for short, medium and long term duration from reverse e-auction facility. In reverse e-auction, availability based tariff /Deviation Settlement Mechanism (DSM) is applied to settle the failed commitments by the electricity sellers or buyers The electricity prices transacted under reverse e-auction facility are far less than the prices agreed under bilateral agreements.

For those power generators who have made power purchase agreements (PPA) with Discoms and need not participate in day ahead market (DAM) trading on daily basis, the pecking order among the power generators in a state is called merit order power generation where the lesser variable generation cost electricity producer is selected out of the available generators to maintain the normal grid frequency.

 What is Availability Tariff ?

     The term Availability Tariff, particularly in the Indian context, stands for a rational tariff structure for power supply from generating stations, on a contracted basis.

 The power plants have fixed and variable costs:

               I.      The fixed cost elements are interest on loan, return on equity, depreciation, O&M expenses, insurance, taxes and interest on working capital.

             II.      The variable cost comprises of the fuel cost, i.e., coal and oil in case of thermal plants and nuclear fuel in case of nuclear plants. In the Availability Tariff mechanism,

The fixed and variable cost components are treated separately. The payment of fixed cost to the generating company is linked to availability of the plant, that is, its capability to deliver MWs on a day-by-day basis. The total amount payable to the generating company over a year towards the fixed cost depends on the average availability (MW delivering capability) of the plant over the year. In case the average actually achieved over the year is higher than the specified norm for plant availability, the generating company gets a higher payment. In case the average availability achieved is lower, the payment is also lower. Hence the name ‘Availability Tariff’. This is the first component of Availability Tariff, and is termed ‘capacity charge’.

The second component of Availability Tariff is the ‘energy charge’, which comprises of the variable cost (i.e., fuel cost) of the power plant for generating energy as per the given schedule for the day. It may specifically be noted that energy charge (at the specified plant-specific rate) is not based on actual generation and plant output, but on scheduled generation. In case there are deviations from the schedule (e.g., if a power plant delivers 600 MW while it was scheduled to supply only 500 MW), the energy charge payment would still be for the scheduled generation (500 MW), and the excess generation (100 MW) would get paid for at a rate dependent on the system conditions prevailing at the time. If the grid has surplus power at the time and frequency is above 50.0 cycles, the rate would be lower. If the excess generation takes place at the time of generation shortage in the system (in which condition the frequency would be below 50.0 cycles), the payment for extra generation would be at a higher rate.

To recapitulate, the 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 MWs, (b) energy charge, to reimburse the fuel cost for scheduled generation, and (c) a payment for deviations from schedule, at a rate dependent on system conditions. The last component would be negative (indicating a payment by the generator for the deviation) in case the power plant is delivering less power than scheduled.

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