Welcome to the faculty and

the students

Power System Deregulation

Presented by
Dr. K.Srinivas
Divisional Engineer
AP TRANSCO
MRT & Transformers
Ongole

Introduction-State Electrical
utility
Power

Generation

Power

Transmission

Power

Distribution

Unbundling of APSEB

Government of AP
Consumers

APERC

IPPS (PPAs)

GENERATION
DETAILS
APGENCO

(MWs)

Thermal

4410

Hydel

1746

Wind

Total

6158

JOINT SECTOR

Gas

34

PRIVATE SECTOR
Gas

1268

Mini hydel

90

Wind

1120

Bio-mass etc

421

Mini power plant

79

Solar

146

Others

68

Total

3192

SHARE FROM CENTRAL

SECTOR
Ramagundam (thermal)
Mapp (nuclear)
Nlc (thermal)
Simhadri (thermal)
Talcher (thermal)
Kaiga npp
Simhadri expansion
Vallur
Tuticorn
Kudamlulam
Total

400
20
148
460
196
129
212
66
67
50
1748

Total Generation
APGENCO

6158
GAS
34
PRIVATE SECTOR
CENTRAL SHARE
TOTAL

11222

3192
1748

SYSTEM STATISTICS OF AP
POWER SECTOR
Maximum

Demand (29/10/15)

Max.

Grid Con MU (10/07/15)

156.44

Per

capita Con (kwh)

1003

6913

Transmission Lines

400

kVckm 2635

220

kVckm 8395

132

kVckm 8775

DISCOMS lines
33

kV

ckm

24387

11

kV

ckm

188859

ckm

293438

LT

APTRANSCO Sub-stations
400

kV

220

kV

72

132

kV

173

DISCOMs Sub-station

33

kV
2700

DISCOMs Distribution
PTRs

658543

Total consumers served

59 64 929

Deregulation taken up in
nineties in the following
countries

UK
Sweden
Finland
Norway
USA
Some

countries of South America

Reasons for Deregulation

High

demand growth

Inefficient
Irrational

system management

tariff policies

Generation

and Transmission
capacity insufficiency

Characteristics of regulated
system
Monopoly

Obligation

to serve all consumers

Total government control
Regulated rates
Generation ,Transmission and
Distribution costs are bundled
leading to charging of average
cost

Reasons for Deregulation

Privatization
Cost

reduction due to
competition

Customer

focus

Encourages

innovation

Marketplace mechanisms
Poolco
Bilateral
Power

Exchange

Exchange

Competitive bidding

Sellers
Price

and buyers submit bids

and quantity quotations are

indicated

Energy auction
Market

Clearing Price (MCP) is

arrived at based on aggregate
supply bid curve of suppliers
and aggregate demand bid
curve for consumers

MCP

is the highest sell bid and

lowest buy bid paid by consumers

Market Models Pool

model

Pool model adopted in UK, single

buyer for all the energy generated
by gencos.
Poolco invites bids for energy and
decides energy price for a particular
period
Poolco is the only buyer and hence
single sided auction
Participation by gencos is mandatory

Open access model

Practiced

in USA and Nordic Pool

Auction

conducted by Power
Exchange

ISO

manages the system

Participation

mandatory

by gencos is not

Responsibilities of ISO
System
Power

security

delivery

Transmission
Service

equity

pricing

quality, efficiency &

ISO Requirements
Experienced
Fully

Engineers and Operators

computerized control centre

Massive

remote data collection

system
Monitor,

system

analyze and control Power

Complexities involved in
Deregulation
Network

congestion
Optimal bidding
Transmission Pricing
Ancillary Service Management
Risk Analysis and Hedging

Network Congestion

Causes

Ways

to tackle congestion

Network congestion-causes
Transmission

system operates
beyond transfer limit

Line

outages and higher load

demands cause congestion

Ways to tackle congestion

Price

Area Congestion
Management

Available

Transfer Capability
(ATC) based Congestion
Management

Optimal

Power Flow (OPF) based

Congestion Management

Price Area Congestion

Management
Practiced

in Nordic pool
consisting of Norway, Sweden,
Denmark and Finland
When Congestion predicted, system
is split into price areas at
predicted congestion bottlenecks
Areas with excess generation
have lower prices
Areas with excess load have higher
prices

Available Transfer
Capability
Practiced

in USA
ISO responsible for calculating
its own ATC
Open Access Same-time
Information System (OASIS)
web site is used to determine
if system could accommodate
the transaction

Optimal Power Flow based

Congestion Management
The

generators send a cost function

and those wishing to purchase load
send a bid function to the ISO

ISO

has the capability to run OPF

and arrive at price/Mw at each
node of the system

Optimal bidding
Gencos

for survival have to

operate efficiently and maximize
profit
Gencos profit affected by bids
placed by competitor, total energy
demand, its own price bid etc.
A low risk bid is such that, it may
have lower profit earning
capability, but high probability of
being selected without regret.

Methods for solving optimal

bidding problem
Game

theory
Dynamic Programming
Genetic algorithm
Optimization bidding strategies
Markov Decision Process

Transmission Pricing
In

the wheeling transaction at

least three parties are normally
involved seller, buyer and one or
more wheeling utilities.
Wheeling rates are
the prices
which are charged for the use
of
transmission network(s) and
are payments made by the seller
and/or buyer
to compensate
the wheeling utility(ies) for the
costs incurred.

Transmission pricing
methods
Flat

fee
Postage Stamp Method
Pro forma transmission tariffs
Mw mile Method
Contract path method
Rated System Path

Flat fee/Postage stamp

methods

Flat fee prices are the simplest

approach as every stakeholder
pays the same amount, distributing
costs equally among users.

Postage

stamp transmission
tariffs set a price based on amount
of power moved and the duration of
use ignoring distance which is
effectively how postage is priced.

Pro forma transmission

tariffs
In

Pro forma transmission tariffs,

user must pay a capacity fee
based on installed cost of the
transmission
system as a
whole , allocated on a per kW
basis , as well as other fees
for use associated with variable
operating costs incurred at the
time of use.

MW-mile/Contract path
methods
Mw

mile Method
sets a
wholesale wheeling price proportional
to both amount and distance e.g., Rs 1
per Mw mile /hour anywhere, anytime
Contract path pricing calls for the price
of transmission from point A to point B
to be based on the cost of a single
identified path.

Rated system path

A

rated system path from one

node (Sending end) to another
node (receiving end) is identified
based on load flow and other
engineering studies of the grid

Ancillary Service
Management

Ancillary

services are defined as all

those activities on the interconnected
grid that are necessary to support
the transmission of power while
maintaining reliable operation and
ensuring the required degree of
quality and safety

Ancillary

services are no longer

treated as an integral part of the
electric supply

They

are unbundled and priced

separately and the system
operators have to purchase
ancillary services from ancillary
service providers

12 Ancillary services
Regulation
Load

following
Energy imbalance
Operating Reserve Spinning
Operating Reserve
supplemental
Back up supply
System control

12 Ancillary services
(contd)
Dynamic

Scheduling
Reactive Power and Voltage
control from Generator Sources
Real power transmission losses
Network Stability Services from
Generation sources
System Black Start Capability

Regulation

- minute -to- minute

generation/load balance within control
area

Load

following - Instant-to-instant
balance between generation and load

Energy

imbalance hour-to-hour load

variation

Risk Analysis and Hedging

Deregulated

electricity markets are

known for high volatility
The participants must find ways to
deal with the uncertainties
when
contracts are evaluated
There are many risk factors
corresponding to these uncertainties
that affect the system
Hedging is a risk management
strategy

Some Sources of Risks in

electricity Markets
Supply

shortage
Defaults
Transmission Constraints
Lack of Experience
Price Information

Supply

shortage due to generation

outage electricity prices shoot up
drastically

Defaults

default of
participants
in honoring a
commitment can be from
seller, buyer or wheeling agency
or a combination of stake holders

Price

Information Inadequacy in
realistic and timely price
information is another source of
risk in electricity markets,
especially at times when
markets have major events
such as outages of large
generation units, defaults and
other factors that cause price
spikes.

Deregulation milestones
Chile

- 1982
UK1990
Argentina, Sweden& Norway1992
Bolivia & Colombia- 1993
Australia- 1994
New Zealand- 1996
USA- 1998

Deregulation Main
features

Unbundling to
separate
generation, transmission and
distribution
units
Creation of intense competition
Pool co/Open access bidding
processes
Construction
of new thermal, wind
and solar plants in both Private
and Public sector companies

Deregulation - Results
Increased

investment in Generation

sector
Improvement in Generating plant
operation
Decrease in system failure probability
Growth in Power Sector

Deregulation Indian
Scenario
Forced

to adopt Deregulation
due to financial constraints
Orissa, Andhra Pradesh, Haryana,
Utter Pradesh and Rajasthan
have undertaken Power Sector
reforms and availed loans from
multinational development banks
such as World Bank, Asian
Development Bank, etc

The Electricity Act 2003

Creating

competition in the industry

Protecting consumer interest
Ensuring supply of electricity to all
areas
Rationalizing tariff
Lowering the cross-subsidization
levels