Availability Based Tariff

by
Krishnakumar R V
M.E Power Engineering & Management
Anna University Chennai
CEG Campus
Availability Based Tariff

Availability Based Tariff (ABT) is a 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.
This is based upon the annual availability of the
Generation Plant rather than Plant Load Factor.

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Need For ABT

• The Indian power system is characterized by low

frequency operation due to continuous power
deficit situation for majority of time.
• The financial constraints typical of a developing
country with large population and unequal
distribution of resources also led to inadequacies of
transmission and distribution network with critical
line loadings and low voltage profile.

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Contd.,

• The scarcity of power and the commercial

mechanism before ABT (based on take-off of power
by States rather than schedules from Central pool)
led to low frequency operation.
• The tariff mechanism did not provide any incentive
to reduce generation under high frequency or to
maximize generation under low frequency.

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ABT Contd.,

• It was introduced in India from 1st July, 2002.

• The commercial mechanism is specifically defined
to suit the deficit power systems.
• The mechanism streamlined the operation of
regional grids.

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Objectives of ABT

• Encourage grid discipline

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

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Availability Based Tariff : Components

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Fixed Charge
• Loan
Part of loan amount for installation of the plant is passed on to the
customers
• Return On Equity
A part of the tariff is used to pay the stakeholders based on their equity
share
• Depreciation
The plant depreciation cost is compounded annually which is used
during the decommissioning of the plant after the prescribed life time of
the plant
• Interest On Working Capital
The interest on working capital is also passed on to customers

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Fixed Charge (contd.,)
• O&M Expenses
It includes the equipment costs which are hired for carrying out
maintenance of the plant and the crew costs this is also passed on to the
customers
• Insurance
The plant is insured against accidents and the employees are also
insured against accidents and a part of the tariff contributes to this.
• Taxes
It includes various local taxes such as land and water taxes

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Contd.,

• 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.
• If the average availability actually achieved over the year is
higher than the specified norm for plant availability, the
generating company gets a higher payment.

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 Contd.,
• If the average availability achieved is lower, the payment is
also lower.
• Hence the name ‘Availability Tariff’.
• Termed as ‘capacity charge’.
• The fixed charges are linked to availability rather than plant
load factor (PLF).

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Fixed charges payable

• Excluding ROE - 0-30% availability

• Including ROE – 30-70% availability
• Beyond 70% increase, incentive given @ 0.4% equity for
each % increase between 70-85%
• Beyond 85% increase, decrement in incentive @0.3%
(prevention of overloading)
• Penalty given to generating utility for over/under
declaration of availability

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Variable Charge

• Termed as Energy Charge

• 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.
• Reimbursement of fuel cost for scheduled generation.
• Payable by every user on a scheduled energy irrespective of
actual drawl

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Contd.,

• It may specifically be noted that energy charge is

not based on actual generation and plant output,
but on scheduled generation.

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Unscheduled interchange charges
• Payment for deviation from schedule at a rate dependent on
system conditions(frequency) at that time
• UI energy = Schedule energy – Actual energy
UI Charges are payable / receivable if
• A beneficiary overdraws power (↓f)
• A beneficiary under draws power (↑f)
• A generator generates more than the schedule (↑f)
• A generator generates less than the schedule (↓ f)

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Contd.,

• In the real time, the actual dispatch is likely to be different

from the schedule.
• Incase there are deviations from the schedule, the energy
charge payment would still be for the scheduled generation.

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An Example

• 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.

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Contd.,

Case i:
If the grid has surplus power at the time and frequency is
above 50.0 cycles, the rate would be lower.
Case ii:
If the excess generation takes place at the time of generation
shortage in the system, the payment for extra generation
would be at a higher rate.

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UI Rate Curve

• Initially, in 2001, when frequency linked UI was proposed for

the first time, the ceiling rate for UI curve was 420 paise /
kWh.
• The UI price curve was a single slopped straight line at that
time.
• It was set considering the price of the costliest fuel at that
time – high speed diesel (HSD).

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Ceiling Rate Of UI Curve

The ceiling rate of UI was modified thrice since then

depending upon the prevailing price of HSD, from
1.420 paise / kWh
2.570 paise / kWh
3.745 paise / kWh
4.1000 paise / kWh.

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Dual Sloped Curve

UI curve became a dual slope curve with

1.Less penalty (incentive) around the nominal frequency.
2.While heavy penalty (incentive) at lower frequencies.

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Dual Sloped UI Rate Curve

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Dual Sloped Curve
Slope 1
The price of UI at 50.2 Hz is zero and increased to 387.50 paisa
per unit at 49.70 Hz linearly with a slope of 15.5 paisa per 0.02
Hz.
Slope 2:
After 49.70Hz linearly increased at the rate of 47 paisa per 0.02
Hz till 49.5 Hz.
Ceiling Price:
At 49.5 Hz and below, the price of UI power is 873 paisa per unit.

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Constituent State’s Response at
Various Frequency Level

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Generator’s Response at Various
Frequency Levels

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The Mechanism of Inter State ABT
• Each day of 24 hours is divided into 96 time blocks of 15
minutes duration
• The process starts with the Central generating stations in
the region declaring their expected output capability for the
next day to the Regional Load Dispatch Center (RLDC).
• The RLDC breaks up and tabulates these output capability
declarations as per the beneficiaries' plant-wise shares and
conveys their entitlements to State Load Dispatch Centers
(SLDCs).
• The latter then carry out an exercise to see how best they
can meet the load of their consumers over the day, from
their own generating stations, along with their entitlement
in the Central stations.

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Contd.,
• The SLDCs then convey to the RLDC their schedule of power
drawal from the Central stations (limited to their
entitlement for the day).
• The RLDC aggregates these requisitions and determines the
dispatch schedules for the Central generating stations and
the drawal schedules for the beneficiaries duly incorporating
any bilateral agreements and adjusting for transmission
losses.
• The schedules are also used for determination of the
amounts payable as energy charges.
• Deviations from schedules are determined in 15-minute
time blocks through special metering, and these deviations
are priced depending on frequency.

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Intra State ABT

• After the unbundling of SEBs, state’s distribution system is divided

into distribution zones.
• Each distribution zone will have schedule for power to be received
from the state owned generators.
• The intra-state generators and distribution zones would have
schedules, metering and energy accounting done by the state load
dispatch center.
States
• Gujarat
• Maharashtra
• Tamil Nadu (Draft Regulation)

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Effects Of ABT
1. Grid Discipline
The commercial signal was absent and hence, the stake holders
were least bothered about the grid condition.
In the ABT era, the actions taken by various entities had a direct
impact on the grid condition.

2. The frequency profile in all the regional grids improved.

In the pre-ABT era, the frequency used to touch as low as 48 Hz.
However, after implementation of the commercial mechanism,
the frequency of various grids was arrested in a tighter band.

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Contd.,

3. The day-ahead scheduling got due importance as the deviation from

the same was termed as unscheduled interchange (UI) and was settled
directly with the frequency linked price.

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Benefits of ABT

• By bifurcating the charges, incentive for trading in power is

enhanced.
• By isolating the variable charge, a beneficiary can trade such
power depending on needs, market demand and economics of
power at home state.
• Facilitates merit order dispatch
• Helps to enforce grid discipline by maintaining frequency in
prescribed band.
• Incentives encourage competition among generators.
• Improved scheduling by G & B, ensures optimum utilization of
available generation capabilities.

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Contd.,

• Commercial & operational disputes resolved.

• High quality metering
• Online connectivity enabling the system operator to
know the actual flows to take appropriate action.
• Transparency and sharing of information to all
participants - improve d trust
• Faster settlement process
• Voltages improved
• Transmission losses reduced
• Transmission capacity increased

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References

• http://npti.in/Download/Distribution/YMPL/third%20party
%20papers-technical%20info/ABT.pdf
• http://www.nptel.ac.in/courses/108101005/reforms%20in%20indian
%20power%20sector/the%20availability%20based%20tariff.html

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