Generation Tariff

Guided By:
By: By:-
(2nd Sem MBA PM)
Mr. K.K. Morya

Prof., UPES
Mr. K.R. Barwa

G.M.- RRVUN
Tuesday, June 28, 2011
Mohit Nebhwani (38), 38), Mohit Tyagi(39), Tyagi(39), Sudhanshu Gupta(68), Gupta(68), Umanshu (74), 74), COMET GROUP Varun Goel (82) 82)
Process of electricity distribution

loss 3-4%
Loss Upto 30%
Say generation Cost per unit= X
Cost per unit = Y where Y = X+ T.C.
Cost per unit=Z Where Z= X+Y+D.C.
Transmission Losses AT&C Losses
3-4% upto 30%
Power cost increases by 35-50% from generation ex-bus to consumer meter 35exTuesday, June 28, 2011 COMET GROUP 2
Generation Tariff
Tariff can be defined as the cost per unit of service. There are two types of tariffs Single Part Tariff Two Part Tariff
The single part tariff is considered more suitable for wind power. Two part tariff is applied to the Thermal Power Plants.
COMET GROUP
Two Part Tariff

Components of Two Part Tariff 1. Capacity Charges/Fixed Charges/Annual Fixed Cost 2. Energy Charge/ Variable Charges
Generation Tariff= Capacity Charges + Energy Charges
COMET GROUP
Components of Capacity Charges

1.
Return on equity Interest on loan capital Depreciation Operation and maintenance expenses Interest on working capital. Cost of secondary fuel(for coal based & lignite fired generating stations only) Special allowance in lieu of R&M or separate compensation allowance, wherever applicable.
COMET GROUP 5
2.
3.
4.
5.
6.
7.
Comparative Analysis of CERC Regulations

Component of Capacity Charges Return on Equity Regulations -2009-14 Regulation-2004-09
15.5%
14%
Interest on Loan Capital
As per Actual
As per Actual
Depreciation
5.28%
3.6% + AAD
Interest on Working Capital
Based on Normative Parameters Based on Normative Parameters

COMET GROUP
Based on Normative Parameters Based on Normative Parameters

6
Operations & Maintenance Costs

1.Return on Equity
Component of Capacity Charges Return on Equity Regulation-2009-14 Regulation-2004-09
15.5%
14%
Additional Return
0.5% (For projects N/A st of April commissioned after 1 2009 with in specified timeline) 17.48% 15.78%
Return on Equity if MAT is applicable
Return on Equity if Corporate Tax is applicable
23.481%
21.20%
COMET GROUP
2.Interest on Loan Capital

Component of Capacity Charges Benefit of Re-Financing Regulation-2009-14 Regulation-2004-09
In ratio 2:1 i.e. 2/3rd to beneficiary and 1/3rd to generator. Weighted average on outstanding normative loan
100% benefit goes to the beneficiary.
Rate of Interest
Weighted average on outstanding normative loan
Normative Loan
Repayment shall be deemed to be equal to the depreciation allowed for the year.
As per Regulatory approval 70% > Actual loan amount
COMET GROUP
3. Depreciation
Component of Capacity Charges Regulation-2009-14 Regulation-2004-09
Depreciation rate
5.28%
3.6% + AAD
AAD
Discontinued
Applicable
COMET GROUP
4. Operation and Maintenance Expenses

Component of Capacity Charges Regulation-2009-14 Regulation-2004-09
Escalation Rate
5.72%
4%
For year 2004-05
Rs 5.2 lakhs/MW
For year 2009-10
Rs 14.8 lakhs/MW
COMET GROUP
10
5. Interest on Working Capital

Component of Capacity Charges Fuel Cost Liquid Fuel Cost Regulation-2009-14 1 month month Regulation-2004-09 1 month month
O&M Expenses Spares
1 month 30% of the O&M Expenses
1 month 1% of historical cost of the project 6% 2 months
Escalation on Spares Receivables Rate of Interest on Working Tuesday, June 28, 2011 Capital
Discontinued 2 months
As per SBI- PLR as on 1st April As per SBI- PLR as on 1st April COMET GROUP 11 of tariff year of tariff year
Norms of Operations
As per Regulation 2009-14 For gas based thermal generating plants Normative Annual Plant Availability Factor 85%
As per Regulation 2004-09 For gas based thermal generating plants Target Plant Load Factor- 80%
Incentives The new CERC regulation states that the incentive would be based on Plant Availability Factor (PAF) rather than the Plant Load Factor (PLF).
COMET GROUP
12
Plant Details
Rajasthan Rajya Vidyut Utpadan Nigam
Generation Capacity :- 100MW Station Heat Rate :- 2075Kcal/KWh PLF :- 80% PAF :- 85% No. of units :- 1
Tuesday, June 28, 2011 COMET GROUP 13
Means of Finance
Capital investment :- Rs 1000 Lacs Additional Capitalisation :- 40 Lacs Total Capital Investment :- 1040 Lacs Debt/Equity ratio :- 70:30 Debt :- 728 Lacs
Equity :- 312 Lacs Cost of land :- 100 Lacs(Assumed)

Additional Capitalisation
Additional Capitalisation' means the capital expenditure incurred or projected to be incurred, after the date of commercial operation of the project and admitted by the Commission after prudence check Initial Spares. Capitalised as a percentage of the original project cost, (i) Coal-based/lignite-fired thermal generating stations - 2.5% Coal-based/lignite (ii) Gas Turbine/Combined Cycle thermal generating stations - 4.0%
COMET GROUP
15
Additional Capitalisation
(i) Undischarged liabilities; (ii) Works deferred for execution. (iii) Procurement of initial capital spares within the original scope of work . (iv) Liabilities to meet award of arbitration or for compliance of the order or decree of a court. (v) Change in law.
Components of Capacity Charges

1.
Return on equity Interest on loan capital Depreciation Operation and maintenance expenses Interest on working capital. Cost of secondary fuel(for coal based & lignite fired generating stations only) Special allowance in lieu of R&M or separate compensation allowance, wherever applicable.
COMET GROUP 17
2.
3.
4.
5.
6.
7.
1. Return on Equity(A)
Return on Equity 15.5% Equity 312 Lacs @15.5% ROE=48.4Lacs per yr A=48.4Lacs
COMET GROUP
18
2. Interest on Loan(B)
Gross Normative loan 728lacs Loan repayment period 10-15yrs 10Net loan amt payable for 1st year 48.53 lacs Opening balance after 1 year 728-48.53= 679 .47 Lacs 728Interest on loan @10% is 728 lac. for the 1st year lac. B= 72.80 Lacs
3. Depreciation(C)
Depreciation of assets upto 90% Depreciation rate 5.28% Depreciable value of the asset 846 lacs(less land cost) lacs(less Depreciation per year @ 5.28% for 1st year is 44.67 lacs(by SLM lacs(by method) C= 44.67Lacs
4. Operation and Maintenance Cost(D)

For Spares 14.8Lacs/MW Escalation rate 5.72% For 100MW Total O&M Cost for yr 1st is 1480Lacs and escalated further per year @ 5.72% D = 1480 Lacs
5. Interest on Working Capital(E)

Components are 1. Fuel cost 1 month 2. Liquid fuel cost month 3. O&M expenses 1 month 4. Spares 30% of O&M cost 5. Receivables 2 months
COMET GROUP
22
Interest on Working Capital(E)

Fuel cost(in Rs Lacs) Lacs) 1. Fuel cost 1 month = 755.18 2. Liquid fuel cost month = 164.25 3. O&M expenses 1 month =1480/12=123.33 4. Spares 30% of O&M cost = 444 5. Receivables 2 months = 1820.79 Total = 3307.5 Lacs Interest on WC @10.25%= 339 Lacs E=339Lacs
Total Capacity Charges

Sum of all component values i.e. A+B+C+D+E = 48.4 +72.80+ 44.67+1480+ 339 Total Capacity Charges= 1984.9 Lacs (A+B+C+D+E) Capacity charges per unit=1984.9*100000/total units generated =0.2920 Rs/unit
Energy Charges
Price of Natural Gas fuel = 3910.16 Rs/1000CM Price of Naptha/Liquid fuel = 19790.49 Rs/MT Naptha/Liquid Escalation rate 4% per yr GCV of natural gas = 9038.82 Kcal/CM GCV of Naptha/liquid fuel = 11330.22 Kcal/Lit. Naptha/liquid GSHR = 2075KCal/KWh
Energy Charges per Unit

Energy Charge Rate(ECR) ECR = Price of fuel*GSHR/GCV of Fuel ECR
for gas
= 3910.16*2075/9038.82 in Rs/unit
ECR for gas = 0.89 Rs/KWh ECR for Naptha = 3.62 Rs/KWh
Generation Details
Capacity :- 100MW :PLF :- 80% :Auxiliary consumptions :- 3% :Total no of units generated= PLF*Installed capacity*8760*(100%-3%)*1000 capacity*8760*(100%Which comes out 679.78MUs
Fuel Cost
Operating pattern on the basis of type of fuel Gas :- 84% :Liquid fuel :- 16% :Gas Fuel cost = units produced by gas fuel*ECRgas fuel*ECR = 571.01 MUs*0.89 Rs/KWh Which comes out Rs 5120.09Lacs For Naptha Rs 3942.05Lacs Total Fuel cost(gas+naptha)= 5129.09+3942.05 cost(gas+naptha)= = 9062.14 in Rs Lacs
COMET GROUP
28
Fuel Cost
9062.14/12 755.18 Lacs Liquid fuel cost for month =3942.05/24 164.25 Lacs Fuel cost for 1 month =
COMET GROUP
29
Energy Charges
Total sum of Fuel costs due to gas as well as by the liquid fuel(naptha) divided by total no. of fuel(naptha) units generated Energy charges per unit = 9062.14Lacs/679.78MUs ECR per unit
1.33Rs/KWh
COMET GROUP 30
Tariff
Sum of Capacity charges per unit and Energy charges per unit
Tariff = (0.292+1.33)Rs/unit = 1.625 Rs/unit
COMET GROUP
31
Multi year Capacity charges
COMET GROUP
32
Multi year Energy charges
COMET GROUP
33
Tariff for Multi year
COMET GROUP
34
COMET GROUP
35

Generation Tariff

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Generation Tariff

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Guided By:

(2nd Sem MBA PM)

Mr. K.K. Morya

Mr. K.R. Barwa

Process of electricity distribution

Say generation Cost per unit= X

Cost per unit = Y where Y = X+ T.C.

Cost per unit=Z Where Z= X+Y+D.C.

Transmission Losses AT&C Losses

3-4% upto 30%

Tuesday, June 28, 2011

Two Part Tariff