ETE -22628 SNH/EE/YBP/Unit II

Tariff, Metering and Billing

5.1 Tariff

Power purchase agreement (PPA) A power purchase agreement (PPA), also known as electricity
power agreement, is a contract between two parties..

1. Which generates electricity (the seller) and

2. Which is looking to purchase electricity (the buyer).

The buyer typically is an utility or trader of electricity.

The PPA defines all of the commercial terms for the sale of electricity between the two parties, it
includes

• The time of commercial operation of the project starts begins

• Schedule for delivery of electricity

• Penalties for under delivery

• Payment terms

• Termination

A PPA is a legal contract between an electricity generator (provider) and a power purchaser
(buyer).

Contractual terms may be of 5 to 20 years, during this period the power purchaser buys energy

The seller under the PPA is typically an independent power producer, or "IPP."

Power cost/ Pricing

Electricity rates are agreed upon as the basis for a PPA.

In a regulated environment, an Electricity Regulator will regulate the price.

A PPA will often specify how much energy the supplier is expected to produce each year and
any excess energy produced will have a negative impact on the sales rate of electricity that the
buyer will be purchasing.

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his system is intended to provide an incentive for the seller to properly estimate the amount of
energy that will be produced in a given period of time.

Tariff Design:

Key factors for Tariff Design A tariff structure is a set of rules and procedures that determines
how to charge different categories of consumers.

Typical tariff structures include:

i) flat-rate tariff
ii) Volumetric tariff based on actual metered consumption: having different variables as,
constant volumetric tariff, increasing block tariff, linear progressive tariff and peak-load
pricing
iii) multi-part tariffs : including two-part tariffs, where users pay both a monthly fee for
access and a usage fee for consumption such as in the water and electricity sectors, and
optional tariffs where customers are offered a menu of pricing plans.

Tariff structures depend on many factors, including the network’s characteristics and the
objectives pursued via pricing policy.

Designing an efficient tariff structure can be done through a step-wise approach:

i) Gathering information about operator’s activity and demand forecasts

ii) Evaluating the effectiveness of the current tariff structure and the need for reform
iii) Announcing the reform
iv) Implementing the proposed reform

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Major Components of an Electricity Bill

Fixed charges: Operation & Maintenance Expenses; Depreciation; Interest on Loan Capital;
Interest on Working Capital; Return on Equity Capital; Income Tax;

Energy charges: The Energy Charges shall cover landed cost of primary fuel and secondary fuel
oil and shall be worked out on the basis of total energy scheduled to be supplied to the
Beneficiary/ies during the calendar month on ex-power plant basis, at the Energy Charge Rate of
the month (with fuel price adjustment

Electricity Duty: The duty is charged on consumption at the applicable rate per unit of electricity
consumed. ... Certain states the duty is charged on the total charges. The only way to reduce the
duty is to reduce the consumption per month. This ensures that efficient energy conservation
measures are taken.

Wheeling charges: Distribution company has to pay the transportation charges to the
Transmission company. These charges are known as Wheeling Charges. The fee associated with
wheeling is referred to as a "wheeling charge." This is an amount in $/MWh which transmission
owner recovers for the use of its system. If the resource entity must go through multiple
[transmission owner]s, it may be charged a wheeling charge for each one.

FAC Charges: FAC (Fuel Adjustment Charge) or FCA (Fuel Cost Adjustment) or FPPCA (Fuel
and Power Purchase Cost Adjustment) is amount that utilities apply on bills based on varying
price of fuel or Coal.

Additional charges: Additional Supply Charge (ASC) at the rate of Rs. 5.36 per unit (kWh) shall
be levied on specified consumer categories to compensate for the costly power purchase
undertaken to reduce load shedding.

Capacitor penalty—for agriculture p.f. penalty : An electric rate may also include additional
charges when the customer has a power factor less than some preset limit, typically between 80
and 90 percent. This is called a power factor penalty since it is a penalty assessed on the
customers electrical bill for lower than optimum power factor.

M.D. Penalty : Maximum demand register (kW or kVA). This is the maximum power value,
usually the average of 15 minutes, reached during the billing period (this average time may vary
depending on the country). Once the value is higher than the contracted power, the customer will
pay a penalty on the electricity bill.

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Special tariffs

5.1.2.1 Average Billing Rate (ABR):

The ratio of the average billing rate for a consumer category (ABR) to the overall average cost of
supply (ACoS) is an indicator of tariff rationalization for that category of consumers. Going
forward, some rationalization is expected in both the scenarios.

The ABR values are derived from the category-wise revenues available to the DISCOM.
Average Billing Rate (ABR) consist of fixed and energy charges, which are reflected in the
electricity bills of the consumers as per their contracted demand.

The actual ACoS for the DISCOMs could vary beyond the lower and higher estimates.

5.1.2.2 Aggregate Revenue Requirement (ARR):

I. Aggregate Revenue Requirement (ARR)means the annual revenue requirement

comprising of allowable expenses and return on capital pertaining to the Generating
Entity, for recovery through tariffs, in accordance with these Regulations.
II. As per Regulation No. 4 of 2005, the licensee is required to file the Aggregate Revenue
Requirement (ARR) for Retail Supply Business and Tariff proposal for the entire control
period i.e., for the period from FY 2014-15 to FY 2018-19.

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The detailed estimation process is shown in figure

Parameters for determination of ARR

a) Operation and Maintenance expenses;

b) Capital Investment Plan;

c) Depreciation d) Contingency Reserves;

e) Interest on Loan;

f) Interest on Working Capital;

g) Return on Equity; h) Income Tax;

i) Non-Tariff Income; and

j) Income from Other Business

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5.1.2.3 Availability Based Tariff (ABT):

i. In power system network the system frequency is a continuously changing variable and
its control needs continuous balance between system demand and generation.
ii. If demand is less than the generation the frequency rises while if the demand is greater
than the generation the frequency falls.
iii. The control of frequency can be managed by either changing the demand.
iv. Availability Based Tariff (ABT) is introduced by Central Electricity Regulatory
Commission (CERC) for suggesting improvement in bulk power tariff in India.

Need of Availability Based Tariff (ABT):

I. Indian Power System is characterized by low frequency system due to continuous power
deficit for most of the time.
II. There is always supply and demand mismatch. T
III. The power demand is always more than the power supply. Due to this the frequency of
Grid remains on lower side.
IV. Before the introduction of Availability Based Tariff, Generating Stations used to deliver
the same amount of MW in spite of need for lower MW demand during the period of
lower power demand.
V. This causes the Grid frequency to be at higher side.
VI. Similarly during the period of higher power demand, Generating Stations used to supply
same MW.
VII. Subsequently, the Grid frequency reduces. This type of Grid operation did not have any
provision to maintain a discipline
VIII. Availability Based Tariff (ABT) is a frequency based pricing scheme adopted in Indian
Power Sector to maintain Grid discipline by implementing incentive / disincentive during
unscheduled power interchange.
IX. ABT was introduced in the year of 2002.

Structure of Availability Based Tariff (fig 5.3):

Availability Based Tariff is a three part pricing scheme i.e. Fixed charge, Variable charge and
Unscheduled Power Interchange (UI) Incentive / Penalty. The following elements are considered
for deriving tariff in ABT mode of operation.

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They are

1. Capacity or fixed charges.

2. Energy Charges.

3. Unscheduled Interchange (UI) Charges

Fixed Cost

1. Fixed Cost is basically imposed on beneficiaries in proportion to their entitled power

from the generating station. This means fixed cost is directly proportional to the plant
capacity shared by the beneficiaries. This is the reason Fixed Charge is often called
Capacity Charge.
2. If the plant availability for a year is more than the set norm, the generating station gets
paid higher. In case the plant availability is less than the set norm over a year, the
generating station is going to be paid lower. This is why this tariff is called Availability
Based Tariff.
3. In earlier tariff, fixed charge was dependent on Plant Load Factor but in Availability
Based Tariff, it is linked with Plant Availability.

Variable cost
1. Variable charge is the cost incurred by Generating Station to produce MW day to day.
Variable charge is also called Energy Charge. It comprises of Fuel charge (like coal
for thermal power plant, Nuclear Fuel Bundle for Nuclear Power Plant, Gas for Gas
Power Plant etc.), Operating expenses etc

Unscheduled Interchange Charge (UI Charge):

1. Unscheduled Interchange means deviation from the scheduled generation of plant or
deviation from scheduled drawl of power by beneficiary.

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2. Suppose a generating station is scheduled to deliver 600 MW but actually on a day it is

supplying 700 MW, even then the station will be paid Energy Charges for scheduled
generation i.e. for 600 MW. For surplus 100 MW, the rate of energy charge will depend
upon the prevailing Grid frequency at the time.
3. This energy charge for surplus supply i.e. 100 MW (for our example) is called
Unscheduled Interchange Charge (UI Charge). The UI charge is linked with Grid
frequency.
4. If the Grid frequency is higher i.e. more than 50.2 Hz, the rate of UI charge is zero.
This means Generating Station will not be paid for excess generation of 100 MW when
Grid frequency is more than 50.2 Hz. Thus the station is forced to reduce its generation to
maintain Grid frequency.
5. Similarly when the Grid frequency is lower, the generating station is paid incentive for
excess generation at UI rate. Let us say the Grid frequency at that time is 49.4 Hz. In
this case, a UI charge at the rate of around 875 Paisa / kWh is paid to the station.

5.1.2.4 Time of Day Tariff (ToD)

1. Time of Day (or TOD) tariff is a tariff structure in which different rates are
applicable for use of electricity at different time of the day.
2. It means that cost of using one unit of electricity will be different in mornings,
noon, evenings and nights.
3. This means that using appliances during certain time of the day will be cheaper
than using them during other times.
4. Time of Day (TOD) tariff, is recognized globally across electricity industries, as
an important Demand Side Management (DSM) measure which is used as a
means of incentivizing consumers to shift a portion of their loads from peak times
to off-peak times

5.3.5 Recent ToD Structure

1. TOD tariff Consumers charged dynamic price for electricity consumed during
peak and off peak period to reduce the negative slope in the load curve.
2. The very basic purpose of TOD tariff is to shift the load from peak to off-peak
hours and avoid spikes in the demand pattern.
3. Hence, no changes have been proposed in the rebate of non-peak hours i.e. 2200
hrs. To 0600 hrs.
4. Revision in ToD tariffs on other slots have been proposed keeping in view the
existing demand pattern as well as the trend in change of consumption pattern of
the consumers in last few years and to encourage the consumers to shift their load
to non-peak hours in order to achieve the desired load curve.

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ToD Structure for LT and HT Consumers:

1) LT II: LT – Non-Residential or Commercial (LT II (A): 0 - 20 kW
2) LT II (B): > 20 kW and ≤ 50 kW and (C) > 50 kW
3) HT I (A): Industry – General
4) HT I (B): Industry – Seasonal

Advantages of ToD:

1. Incentivizes consumers to shift demand to off peak period thereby reducing peak
demand

2. Advantage to (Additional revenue/ Cost Reduction for Utility) Utility:

3. Additional revenue on account of TOD surcharge during peak hours

4. Reduction in cost of power purchase due to reduction in peak consumption

5. Revenue gain due to increase in sales during of peak hours (shifting of load from peak

hours\to peak

5.1.3kVAhTariff
1. kVAh based tariff use to motivate industrial and non-domestic consumers to
maintain power factor.
2. The prime objective of kVAh-based billing is to encourage the consumers to
maintain near unity power factor.
3. By kVAh billing, the consumers will be encouraged to adopt energy
efficiency programs and will be benefited by reduced electricity bills.

Implementation of kVAh tariff in Maharashtra State:

As per MERC Order in Case no. 195 of 2017 dated September 12, 2018, The
Commission intends

to implement kVAh billing to all HT consumer and LT consumers having load above 20
kW from

1 st April, 2020.

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Advantage of kVAh Tariff:

1. kVAh billing will ensure that the consumers who will utilize the power efficiently
will be
paying less energy charges as compared to others who are not using the power
efficiently.
2. The new billing methodology will be much simpler to understand as number of
parameters
viz. PF, RkVAh (lead/lag), kWh units) will be reduced.
3. The kVAh based billing has an inbuilt incentive/penalty mechanism and therefore
separate
mechanism for the PF incentive/penalty is no more required. It will encourage the
consumers to improve the power factor by way of reactive power compensation at the
load point itself.
4. With better power factor, the line loading shall be lower for the same kW requirement
leading to lower transmission as well as distribution losses.
5. Power supply quality will be improved. 6. It is beneficial for both - consumers and
MSEDCL

5.2. 1.Metering and Bill Management:

Net metering Net metering is a billing mechanism that credits solar (or other) energy
system owners for the electricity they add to the grid. Let’s say your rooftop solar system
generates 10 units (kWh) of electricity during the day, but you only consume 8 units for
powering your various devices/appliances. You are left with 2 excess units. This excess energy is
fed into the grid. At night, without the sun powering your rooftop system, you again need
electricity. Let’s say you consumed 2 units from the grid at night. Your day’s grid electricity
consumption forms the grid is zero. In some cases, if you supply more power to the grid than you
draw from it, you can even earn money.

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5.2. 2Gross Metering

In this mechanism of billing, the billing is done separately for the power consumed from
the grid and the power fed to the grid. The handy thing about gross metering is that your
electricity bill tells you exactly how much electricity your solar system has generated without the
ambiguity of the net metering approach. Gross metering also records the entire amount of
electricity that is consumed by your home.

MERC Rules for Net Metering (2015)

1. Net Metering arrangement shall be permitted by the Distribution Licensee (a

person granted a License to operate and maintain a distribution system for
supplying electricity to consumers in his area of supply) on a non-
discriminatory and ‘first come, first serve’ basis to the Eligible Consumer who
intends to install a Rooftop Solar system connected to the network of
Distribution Licensee; Provided that the interconnection of such system with
the network of the Distribution Licensee is undertaken in accordance with the
standards and norms specified in the Central Electricity Authority (CEA)
(Technical Standard for Connectivity of the Distributed Generation
Resources) Regulations, 2013.
2. The Distribution Licensee shall allow Net Metering arrangement to Eligible
Consumers so long as the cumulative capacity utilized at a particular
distribution transformer does not exceed 15% of the rated capacity of that
distribution transformer.
3. The Distribution Licensee shall provide yearly, on its website and to the
Commission, information regarding the distribution transformer level capacity
available for connecting Rooftop Solar system under Net Metering
arrangements.
4. The maximum Rooftop Solar system capacity to be installed at any Eligible
Consumer’s premises shall be governed by the available capacity of the
service line connections of the Eligible Consumer’s premises and the
cumulative capacity utilized at particular distribution transformer.

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5. Provided that the capacity of the Rooftop Solar system to be connected at

Eligible Consumer’s premises shall not exceed his Contract Demand or
connected load of the Eligible Consumer.
6. The capacity limits for the connectivity of Rooftop Solar system to the
network of Distribution Licensee are as follows:

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