POWER SECTOR

MOVING TOWARDS
DEREGULATION
Dr. YOG RAJ SOOD
Professor & Dean (R & D)
Department Of Electrical Engineering
NATIONAL INSTITUTE OF TECHNOLOGY
HAMIRPUR 177 005 (H.P.)
1

Since the mid-1980s the electrical power

supply industry around the world has
experienced a period of rapid and critical
changes, regarding the way electricity is
generated, transmitted and distributed.

The need for more efficiency in power

production and delivery has led to
privatization,
restructuring
and
finally
deregulation of the power sectors in several
countries traditionally under control of
federal and state governments.
2

Many countries like England, United States of

America, Canada, Australia, New Zealand, Chile,
Argentina, Peru and Colombia are already
exercising with deregulated electricity industry.

Though there are some pitfalls here and there, the

end users of the system are enjoying the fruits of
the deregulated electricity industry tree.

Many developing countries like INDIA are also

moving towards restructuring and deregulation of
power sector.

Wheeling
It

istheuseoftransmissionfacilitiesofasystemtotransmit
powerforothersellersandbuyers.

Definitions;

Wheeling is the transmission of power from a seller to a

buyer through the network owned by a third party.
It may be defined as, the use of transmission or
distribution facilities of a system to transmit power of and
for another entity or entities.
It may also be defined as , Wheeling is the use of some
partys (or parties) transmission system(s) for the benefit of
the other parties.

Intraditionalpowersystem,governmentsmostlyown
the integrated electricity utilities, having complete
controlovergeneration,transmissionanddistribution.
Historically, wheeling has not been a very important
issue. Intervening utilities have been involved
formally as part of a contract path between a buyer
andasellerutility.

Wheeling is a mongrel concept resulting from

mating two inherently different economic
concepts: an ideal world of regulated utilities, and
an ideal deregulated competitive market place.
It is an important link between conventional
integrated power system and deregulated power
industry.
In deregulated environment, the transmission
system owners could be considered as the third
party to provide wheeling for buyers (retailers or
bulk load centers) and sellers (generation
companies or IPPs).

GENERATION

Tieline

TRANSMISSION

Tieline

DISTRIBUTION

Fig1.1:Traditionalintegratedpowersystem

GENERATION

Tieline

TRANSMISSION

Tieline

DISTRIBUTION

Fig1.1:Traditionalintegratedpowersystem

The necessary requirement for deregulation is

restructuring of electricity supply industry (ESI)
whosebasicfeatures areasfollows:
To introduce competition into a hitherto
monopolistic industry. In order to achieve this, to
separate (vertical unbundling) the functions of
power generation, transmission, distribution and
electricitysupplytoconsumers.
To create several competing electricity generations
companies(horizontalunbundling).
Torecognizethatthepowertransmissionsystemis
a natural monopoly and, accordingly, to make
specialregulatoryprovisionsinthisrespect.
Toallowconsumers,toexercisechoicebetween
suppliers(generationcompanies)whilestillusing
theexistingtransmissionfacilities.

Genco

Genco

Genco

Transco

Tielines

Disco

IPP

Tielines

Disco
Genco

Genco

Bulkconsumers

Deregulatedpowersystem

10

Genco-2

Genco-1

Genco-3

Transco

Tielines

Disco-1

IPP

Tielines

Disco-2
Genco-5

Genco-4

Bulkconsumers

Deregulatedpowersystem

11

Benefits from the

deregulation

Main benefits from the deregulation

are, cheaper electricity and efficient
capacity expansion planning.
The deregulation of power sector
provides a fair competition among
producers as well as more choice
and better service for consumers of
electricity.
12

T2
13

12

11

L18

L17

10
L16

L15

L14

L11

L8
3

G!

L5
T1

L3

L4
T3

T1
G2

G3
5

400KV
T 28

15

16

T 29

G4

L24

T2

L1

765KV

L2
2

17

18
L26

L27
T 30

14
L19

L22

L25

L20

T 31

L12
L9

L21

L23
T3

L10
L13

13

Wheeling transactions

It is defined as, the transmission of

electrical power for other entity (ies) by
a utility that neither generates nor
intends to use the power as a system
resource for meeting its own native
load.
The receipt and delivery of the wheeled
power must be simultaneous.

14

Types of transactions

Feasible Transactions
Feasible
transactions
can
be
accommodated without violating the
transmission network constraints.
Non-Feasible Transactions
Unfeasible
transactions
violate
transmission network constraints and
hence cannot be accommodated
fully.
15

Firm Transactions
These are the transactions that are
not
subject
to
discretionary
interruptions. These are also known
as reserved transactions.
Non-firm Transactions
These transactions may be curtailed
at the utilitys discretion. These are
also called as-available transactions.

16

Bilateral Transactions
It is a bilateral exchange of power between a
buying and a selling entity. The exchange can
be proposed, scheduled or actual.
Multilateral Transactions
In a multilateral transaction power is injected
(generations) at different buses and taken out
(loads) at some another different buses
simultaneously. Such that sum of all
generations is equal to all loads in the
transaction, excluding losses. Losses may be
supplied by generators of the transactions or
by the pool/utility as per pre defined contract.

17

Steps towards
deregulation
Privatization
Transmission Open Access
(TOA)
Re-structuring
De-regulation

18

Privatization:
Sale by a government of its state-owned
electric utility assets, and operating
company, to private companies.
Transmission Open Access (TOA):
Because of transmission open access,
entities that did not own transmission
lines were granted the right to use the
transmission system. The aim of TOA is
to introduce competition into the
traditional regulated utilities without
giving up the existing regulating19

Re-structuring
Re-structuring of regulated power sector is
to separate the functions of power
generation, transmission and distribution.
De-regulation
It is changing the monopoly franchise rule
or other regulations of regulated industry,
that affect how electric companies do
business, and how customers may buy
electric power and services.
20

COMPONENTS OF DEREGULATED
SYSTEM

Generation Companies (Gencos)

Build Operate and Transfer (BOT) plant or
Independent Power Producers (IPPs)
Transmission Companies (Transcos) and
Transmission Owners (Tos)
Distribution
Companies
(Discos)
and
Retailers
Independent System Operator (ISO)
Power Exchanger (PX)
Scheduling Coordinators (SCs)

21

Generation
Companies
(Gencos)
Gencos
are
responsible
for
operating
and
maintaining
generating plants in the generation
sector and in most of cases, are the
owners of the plants. In some cases
individual generators do not market
their output, but only Genco market
the output of all its generators.
22

Build Operate and Transfer (BOT)

plant
or
Independent
Power
Producers (IPPs)

BOT or IPPs can

generator-serving
independently market
trading entity or to
entity.

act as its own

entity
and
its output to a
a loadserving

23

Transmission Companies (Transcos)

and Transmission Owners (Tos)
Transcos moves power in bulk quantities
from where it is produced to where it is
delivered. In most deregulated industry
structures, the Transmission companies
owns and maintain transmission lines
under monopoly franchise and are
called Transmission Owners (Tos), but
they does not operate them. The
independent system operators do that.
24

Distribution
Companies
(Discos) and Retailers
Discos assume the same responsibility
on the distribution side as in a
traditional regulatory supply utility.
However, a trend in deregulation is
that Discos may now be restricted to
maintain the distribution network and
provide
facilities
for
electricity
delivery while retailers are separated
from Discos and sales electric energy
to end consumers.
25

Independent
System
Operator (ISO)
The ISO is the supreme entity in
the
control
of
transmission
system. The basic requirements
of an ISO is disassociation from
all market participants and
absence from any financial
interest in the generation and
distribution business.
26

Power Exchanger (PX)

The PX handles the electric power
pool, which provides a forum to match
electrical energy supply and demand
based on bid prices. The time horizon
of the pool market may range from
half an hour to a week or longer.
The most usual is the day-ahead
market to facilitate energy trading one
day before each operating day.

27

Scheduling Coordinators (SCs)

SCs aggregate participants in the energy

trade and are free to use protocols that
may differ from pool rules.

In other words market participants may

enter an SCs market under SCs rules
through
bilateral
and
multilateral
transactions.

28

EXISTING MODELS OF DEREGULATION

Pool Model
Pool and Bilateral Model
Multilateral Trades Model

29

Pool Model

GENCOS

ISO
PX

TRANSMISSION

POOL

TRANSCOS

RETAILERS

DISCOS

CONSUMERS

Energy sales

Energy Flow

Coordination

The England &

Wales model is
typical of this
category.
The
deregulation
model of Chile,
Argentina
and
East
Australia
also fall in this
category
with
some
modifications.

Figure1.3:PowerPoolModel

30

Pool & Bilateral Model

The California
model is of
this category.
The
Nordic
model and the
New Zeeland
model almost
fall into this
category with
some
modifications.

GENCOS

ISO

PX

SCs

RETAILERS

Transco

DISCOS

CONSUMERS

Energy sales

Energy Flow

Figure1.4:Poolandbilateralmodel

Coordination

31

Multilateral Trades Model

GENCOS

SCs

ISO

TRANSCOS

RETAILERS

DISCOS

CONSUMERS

Energy sales

Energy Flow

Coordination

This model envisages

that
multiple
separate
energy
markets, dominated
by multilateral and
bilateral
transactions, which
coexist in the system
The concept of pool
and PX disappear
into this multi-market
structure.
The models such as
the New York Power
Pool (NYPP) model
fall somewhere in
between these three
models.

Figure1..5:MultilateralTradeModel

32

Single Auction Power Pool

(U.K.)
MarketClearingPrice

Cn

BidPrice

C3

LoadForecast

C2

Generation
Offer
Prices

C1

B1B2B3..BN

Fig1.6

EnergyBid

33

Double Auction Power Pool (New

Zealand)
PurchaseBidPrices
MarketClearingPrice

BidPrice
EnergyCleared

Generation
Offer
Prices
Fig.1.7

P P2P3
PN

EnergyBid
PD1PD2PDM
1

34

In actual practice bid characteristics are

not so simple.
In my research work, the proposed
generalized deregulated model has
been analyzed on IEEE-30 test system
All the six generators are assumed to
bid following cost characteristics

35

Quadraticatbus1
C ( Pg 1 ) 26.0 * Pg i 0.00375 * Pg 12

Valvepointloadingatbus2
C ( Pg 2 ) 20.0 * Pg 2 0.001 * Pg 22
abs (150 * sin(0.098 * ( Pg 2 ))

Piecewisequadraticwithdoublebidatbus5
C ( Pg 5 ) 20.0 * Pg 5 0.001 * Pg 52
for0 Pg 5 20
C ( Pg 5 ) 400.4 25.0 * ( Pg 5 20) 0.001 * ( Pg 5 - 20) 2
for20 Pg 5 33

36

Quadraticatbus8and11.
C ( Pg 8 ) 24.5 * Pg 8 0.000275 * Pg 82
2
C ( Pg11 ) 26.5 * Pg11 0.000375 * Pg 11

Piecewise quadratic with prohibited operating zones

atbus13.
2
C ( Pg13 ) 22.45 * Pg13 0.0004 * Pg13
for0 Pg13 10

C ( Pg13 ) Pr ohibited for10 Pg13 11.5

2
C ( Pg13 ) 25.55 * Pg13 0.0005 * Pg13
for11.5 Pg13 20

37

38

39

40

41

Subjecttothefollowingconstraintsafteraddingallfirmtransactions.
Thepowerflowequationofthepowernetwork g (V , ) 0

Pi (V, ) Pinet
Where
ForeachPQbusi

net

g(V, ) Qi (V, ) Qi
P (V, ) P net
m
m

ForeachPVbusm,not
includingtheref.bus.

where:
PandarerespectivelycalculatedrealandreactivepowerforPQbusi.
Qi
i

andarerespectivelyspecifiedrealandreactivepowerforPQbusi.
Pinet
Qinet
PmandarerespectivelycalculatedandspecifiedrealpowerforPVbusm.
Qmnet

V andarevoltagemagnitudeandphaseanglesofdifferentbuses.

42

43

44

45

46

47

48

49

ALLOCATION OF
EMBEDED COST

SRMC of transactions as determined in the

previous chapter, accounts for the
transmission losses in the system.
But this does not consider the embedded cost
of various transmission facilities.
Embedded cost is defined as the revenue
requirements needed to pay for all existing
facilities plus any new facilities added to the
power system during the life of the contract for
transmission service.
service
50

The embedded cost allocation is required both for

integrated regulated power sector moving towards
deregulation as well as deregulated power sector.
However in deregulated power system the
electricity market is decided for an hour (in some
cases only for half an hour).
So the cost allocation for each transaction has
been calculated in $/ hour (or Rs. per hour).
In this chapter basic methods reported in the
literature have been reviewed.
These methods along with proposed method have
been analyzed on 18-bus South African system.
In the next chapter proposed method has been
applied to 75-bus Indian power system as well as
IEEE-118 bus system.

51

MATHEMATICAL FORMULATION

From the Transmission Company cost data,

transmission facility cost (TFCf) of each facility
f is calculated for the year under study.
The annual fixed charged rate (AFCR) is
calculated for the year under study from the
sum of per unit cost data, which includes
maintenance cost, taxes, insurance, inflation
rate, administrative and general expenses.
Transmission cost of facility f to be allocated to
transmission
system
user,
i.e.
total
transmission annual revenue requirement for
the facility f, is given by
Cf = AFCR*TFCf
52

Postage Stamp Method

The postage stamp (PS) method also called Rolled-in
method,isbasedontheideathateachpartybenefits from
the use of the transmission system and total costs are
thereforeallocatedproportionallytotransactionamountof
eachparty.ThecostCaTofthetransactionPwiscalculated
as
Ca T

Pw
C

Ppeak 8760

(5.1)

where:
C=Totaltransmissionannualrevenuerequirement
C C f
f

Ppeak is the maximum active load of the complete

transmissionsystem.

53

Contract Path Method

This is second traditional method called the Contract
Path (CP) method, is based upon the assumption that the
wheel is confined to flow along a specified electrically
continuous path through the transmission system. The
transactioncostCbTfortransactionofPwisgivenby

CbT

Pw
Pmin, path

Cf

path

8760

(5.2)

where
Pmin, path istheminimumlongtermratingofall

transmissionlinesonthecontractpath
C f isthesumofannualcostofalltransmission

path

facilityalongthespecifiedpath

54

MW Mile Method:
According to MW Mile (MWM) method, embedded costs of
transmissionsystemareallocatedproportionallytothechangeinthe
lineMWflowscausedbytransactionandlengthofthelineinmiles.
The transaction cost CcT is $/h for a transaction T is given by the
followingequations.
CcT

C ( MW f )T L f
f

8760 ( ( MW f )T L f )
T

(5.3)

where
MW f MW f ( with transaction T ) MW f ( without transaction T)
Lf=LengthoftransmissionLinef
(MWf)T=MWflowinfacilityfduetotransactionT.

55

 MWM-net
Negative MW line flow changes whose line loading
decreases due to the wheel are subtracted from the positive
MW line flow changes and the wheeling costs are
correspondingly lowered or even reversed in sign. This may
lead to negative charges. This method is considered in this
work.
MWM-pos
Only positive MW line flow changes are used in computing
thesumofthechangesinequation(6.3)andnegative MW line
flow changes are ignored. In this way, transactions relieving
loadedtransmissionlinesarenotconsidered.
MWM-gross
Positiveandnegative MW lineflowchangesareindividually
converted to absolute values and added and thus equally
contributetopositivewheelingcosts.Thiscausesapricetobe
paidbythewheelingpartyevenifthetransmissionnetworkis
56
relieved.

Boundary Flow Method:

Boundary Flow (BF) method is used for calculating the
changes for transmission transaction across the borders of a grid.
Theresultingcost in $/h allocation to a transaction T is given by
thefollowingequation
Cd T

C ( 12 MWi )
i

8760( Pmax

loading

(5.4)

where:

MWi MWi ( with transaction T ) MWi ( without transaction T)

Pmax loading isthemaximumactiveloadtransmissionsystem(grid)

includingwheelingtransaction.
i =boundarylines

57

Two power flows, executed successively with

and without the transaction, yield the changes
in individual boundary lines.
Once again, three cases can be distinguished:
BF-net, BF-pos and BF-gross. However
BF-net is considered in this paper.
BF method is useful when more then one
transmission company is involved in wheeling
transaction.
The distance wheeled is not taken into
account in this method.

58

MVA Mile Method:

ThetransactioncostC5Tis$/hforatransactionTisgivenby
thefollowingequations.
CeT

C ( MVA f )T L f
f

8760 ( ( MVA f )T L f )
T

(5.5)

where:
Lf=Lengthoftransmissionfacilityf
(MVAf)T=MVAflowinfacilityfduetotransactionT.
Dependingonthedirection of power flow, three sub-methods
canalsobedistinguishedinthisproposedmethod.The MVA net
change (MVAM-net), MVA positive change (MVAM-pos) and
MVA gross change (MVAM-gross). The same sign conventions
holdasfortheMW-Milemethod.
A transaction causing more reactive power loading will be
allocatedmorecostthanothertransactions,bythismethodonly.So
this method is most realistic and fair among all existing methods,
59
includingMW-milemethod.

New Proposed Method

In Flow-mile method the changes in flow (MW or MVA) in

the each facility, due to a transaction are multiplied by
the length of each facility.
It means for the same transmission of power, a
transmission line with long length, will have more
weightage over short length line.
If all the lines have same rating than there is no problem.
But two transmission lines with same length may have
different ratings and hence different cost,
So they should have different weightage for cost
allocation.

60

Proposed MW cost Method:

ThetransactioncostCnTis$/hforatransactionT
isgivenbythefollowingequations.
CnT

C ( MW f )T C f
f

8760 ( ( MW f )T C f )
T

(5.6)

where
MVA f MW f ( with T ) MW f ( without T)

Cf=Costoftransmissionfacilityf
(MWf)T=MWflowinfacilityf duetotransaction
T.

Depending on the direction of power flow, three

sub-methods can also be distinguished. The MW
net change (MWC-net), MW positive change
(MWC-pos) and MW gross change (MWC-gross).
The same sign conventions hold as for the MWmilemethod.

61

Proposed MVA cost Method:

The transaction cost CnnT is $/h for a transaction T is
givenbythefollowingequations.

CnnT

C ( MVA f )T C f
f

8760 ( ( MVA f )T C f )
T

(5.7)

where
Cf=Costoftransmissionfacilityf
(MVAf)T=MVAflowinfacilityfduetotransactionT.
Depending on the direction of power flow, three submethods can also be distinguished. The MVA net
change (MVAC-net), MVA positive change (MVACpos)andMVA gross change (MVAC-gross). The same
signconventionsholdasfortheMW-costmethod.

62

SIMULATION RESULTS

All above methods of allocation of embedded

cost have been analyzed on modified 18-bus
South African power system.
Single line diagram of this system is shown in
fig. 5.1
Four simultaneous bilateral transactions as
given in table 5.1 and shown in fig.5.1 are
added to this system for analysis.

63

13

12

T2

T4

L18

11
L17

L16

10
L1 5

L14

L11

L8
3

G !

L5
T1

L3

L4

T1
G 2

T3

G 3
5

400K V
T28

15

16
L24

T2

T29

G 4
L1

765KV

L2
2

17

18
L26

L27
T30

14
L19

L22

L25

L20

T31

L12
L9

L21

L23
T3

L10
L13

T4

Fig5.1:SouthAfricaPowerSystem

64

Table5.1:(Transactions)
Transa From To
Valueof
ction
Bus Bus
Transaction
No.
No.
(MW) MVAR
T1
4
13
10.0
0.0
T2
11
5
12.0
0.0
T3
3
14
15.0
7.2645
(pf=0.9)
T4
6
12
25.0 12.1075(
pf=0.9)

65

Postage Stamp Method:

Table5.2:(PostageStampMethod)
Transa
Cost
Cost($/M
ction ($/hour)
Wh)
T1
18.17
1.817
T2
21.80
1.817
T3
27.25
1.817
T4
45.42
1.817
So PS method is easy to implement and does not require a
powerflowinthecalculationprocess.Neitherthedistancewheeled,
norreverseflowsaretakenintoaccount.

66

3.1 Contract Path Method

Table5.3:(ContractPathMethod)
Transa Pmin
ContractPath
Cost
Cost
ction
($/hour)
($/MWh)
path
(MW)
T1
500
Line8-11-1453.54
5.35
15-16-17-18
T2
500 Line16-15-14- 60.00
5.00
11-8-7
T3
500
Line5-13-23
41.38
2.76
T4
500 Line10-13-23- 25.03
1.00
21-18
TheCPmethodiseasytoimplement,buttheembeddedcapital
costofthosefacilities,whichliesalongtheassumedpath,isonly
takenintoconsideration.Moreoverneitherreverseflowsorparallel
flowsareconsidered.

67

TestProblemandResults
13

T2

T4

12
L18

11
L17

10
L16

L1 5

L14

L11

L8
3

G!

L5
T1

L3

L4

T1

T3

G2

G3
5

400K V
T28

15

16
L24

T2

T29

G4
L1

765K V

L2
2

17

18
L26
L19

14

L27
T30

L22

L25

L20

T31

L12
L9

L21

L23
T3

L10
L13

T4

SouthAfricaPowerSystem

68

Boundary Flow Method:

Table:5.4(BoundaryFlowMethod)
Trans Costallocationofarea
action
B
($/hour) ($/MWh)
2.663603
T1
0.26636
-4.67021 -0.38918
T2
2.678539 0.178569
T3
2.685305 0.107412
T4
The boundary lines are 12,13,22 and
23.Resultofthis method is difficult tocompare
with other methods, because this method has
been used for calculating the cost allocation
acrosstheborderofthegridBonly.

69

13

12

T2

T4

L18

11
L17

10
L16

L1 5

L14

L11

L8
3

G!

L5
T1

L3

L4

T1

T3

G2

G3
5

400K V
T28

15

16

T29

G4

L24

T2

L1

765K V

L2
2

17

18
L26
L19

14

L27
T30

L22

L25

L20

T31

L12
L9

L21

L23

L10
L13

T3

T4

B
SouthAfricaPowerSystem

70

Flow-mile Method

This method is possibly the fairest among

all the above methods. However it requires
lot of computations, in particular for large
number of simultaneous transactions. The
following two cases are considered.
Case1: Four simultaneous transactions
as shown in table 5.1 with only real
component has been taken for analysis.
Case2:
All transactions as in case1.
Both real as well as reactive component
of transactions T3 and T4 has been
considered for analysis.

71

MW-Mile Method
Table5.5:(MW-MileMethod)
ran
Case1
Case2
acti
Cost
Cost
Cost
Cost
n
($/hour) ($/MWh) ($/hour)
($/MWh)
T1
67.93
6.79
67.84
6.78
T2 -106.97
-8.91
-107.32
-8.94
T3
88.37
5.89
88.34
5.89
T4
57.17
2.29
55.88
2.24
Pool 9009.28
1.82
9011.03
1.82
72

MVA-Mile method:
Trans
T1
T2
T3
T4
Pool

Table5.6:(MVA-MileMethod)
Case1
Case2
Cost
Cost
Cost
Cost
($/hour)
($/MWh)
($/hour) ($/MWh)
80.94
8.09
81.30
8.13
-110.75
-9.23
-111.33
-9.28
108.78
7.25
109.27
7.28
95.70
3.83
82.05
3.28
8941.10
1.80
8834.96
1.81
73

Proposed Flow-cost method

Table5.7:(proposedMW-CostMethod)
Transac
Case1
Case2
tion
Cost
Cost
Cost
Cost
($/hour) ($/MWh) ($/hour) ($/MWh)
T1
70.97
7.10
70.91
7.09
T2
-103.35
-8.61 -103.59
-8.63
T3
87.03
5.80
87.01
5.80
T4
33.91
1.36
33.32
1.33
Pool
9027.22
1.82 9028.12
1.82
74

Table5.8:(ProposedMVA-CostMethod)
Transac
Case1
Case2
tion
Cost
Cost
Cost
Cost
($/hour)
($/MWh) ($/hour) ($/MWh)
T1
80.33
8.03
80.74
8.07
T2
-106.90
-8.91 -107.50
-8.96
T3
102.26
6.82 102.83
6.86
T4
63.39
2.54
50.42
2.02
Pool
8976.70
1.81 8989.30
1.81

75

The ISO is a main entity for the

ISO
Activities
in
Pool
Market
management and control of power
pool. Its main activities are
classified as:

24-hours ahead of schedule

In real time
After real time
76

24-hours
of
schedule
Receives ahead
supply curves from each

generator, demand curves from

load and also willingness to pay
price from non-firm transactions
next 24 hour/48 half-hour periods.
Determine a feasible schedule that
maximizes social welfare.

77

In real time

Dispatches generation, load and

transactions and network services.
Deviation
from
schedule
are
determined and penalized

78

After real time

Calculates nodal price of energy,

network
service
charges,
embedded cost allocation, etc.
Calculate
final
settlements
including prices and penalties.

79

Hedging Arrangement
Customer

Bulk

x
HEDGING

Power
Markets

ORGANISATION
x+y

(y)

Price

Customer
2

Fig1.8

80

Ancillary Services
Ancillary services are needed to fine tune
system energy needs Rely firmly on them
for Reliability
Market competition
Spinning reserve
Non-spinning reserve
Replacement reserves

Bilateral contracts
Voltage support (Regulation up and down
Reactive power support
81

INDIAN POWER SECTOR

Till 1991, the power sector was mainly under the
government ownership under various states and central
government owned utilities.
In mid 1990s, Orissa began a process of fundamental
restructuring of the state power sector.
Under the World Bank (WB) loan, the state decided to
adopt-what is known as WB-Orissa model of reform. This
consist of following three strategy.
(i) Un-bundling the integrated utility in three separate
sectors of generation, transmission and distribution.
(ii) Privatization of the generation and distribution
companies
(iii) Establishment of independent regulatory commission to
regulate these utilities.

82

Soon afterwards several other states

such as Andhra Pradesh, Haryana,
Uttar Pradesh and Rajasthan also
embarked on similar reforms and
also availed loans from multilateral
development banks such as the WB
and Asian Development Bank.
Later states of Karnataka and Delhi
also joined the bandwagon.
83

The Electricity Regulatory Commissions

Act, 1998 of the central government
enabled states to establish independent
regulatory commissions alleviating the
need for a state level legislation.
Several states such as Maharashtra,
Tamil Nadu and Punjab have established
regulatory commissions under this
central legislation.
84

In August 2001, the central government

has introduced a bill, 'The Electricity Bill
2001.

It provides for increased competition in

the power sector by facilitating open
access to transmission and distribution
grid, power trading, and also allowing
setting up of captive power plants
without any restriction.

After lot of modifications, the electricity

act 2003 was passed by the Indian
Government.
85

The importance of the electricity Act 2003:

The freedom of generating companies to sell

electricity to third party.
The act will improve the efficiency of thermal
power plants via improvement in plant load
factor.
Various players (IPP) would come forward for
producing electricity in the Indian Market.
In this act there is a provision of Regulatory
Commission.
The role of regulator would not confine only to
tariff setter but would also be to see whether
generation is taking place from different
producers in such a way that it is leading to
optimum utilization of different sources of energy.

86

Dr. Yog Raj Sood

Mobile: 094180-58505
Phone:
01972-254522( Office)
Res.
01972-254523
Fax: 01972-223834
Email: yrsood@gmail.com

87

NationalConference

December 26- 27, 2008

Web Site: www.raee2008.wordpress.com
E-mail: raee2008nith@gmail.com
88