Argentina Study

Argentina A Study of different Power Sector

PREPARED BY: AKHIL GOYAL (R100107006) DEEPAK SHARMA (R100107029)

Contents 2

 Basics  Argentina Model  Lessons Learnt  Orissa Model

 Delhi Model  Indian Model Akhil, Deepak

December 5th 2008

Basics 3

 Restructuring refers to changes in structure. It is

about commercial arrangements for selling energy: separating or “unbundling” integrated industry structures and introducing competition and choice.  Privatization is a change from government to private ownership, and is the end-point of a continuum of changes in ownership and management.

Akhil, Deepak

December 5th 2008

Contd.. 4

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In the case of structure the models are defined by the degree of competition: Model 1: No competition at all. Model 2: Requires a single buyer or purchasing agency to choose from a number of different producers, to encourage competition in generation. Model 3: Allows distribution companies to choose their supplier, which brings competition into generation and wholesale supply. Model 4: Allows all customers to choose their supplier, which implies full retail competition.

Akhil, Deepak

December 5th 2008

Contd.. 5

In the case of ownership and management, three different levels can be considered:  First level: The ESI is a government department, with no separate accounts, and often with responsibilities that are only remotely connected to electricity production.  Second level: The ESI is a distinct governmentowned company, or nationalized industry.  Third level: The ESI is a privately owned industry.

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Argentina : Power Sector 7

 Law Nº 24065 of January 1992 (Energy Act) [8]

divides the electricity industry into three sectors: generation, transmission and distribution.  The generation sector is organized on a

competitive basis with independent generation companies selling their production in the Wholesale Electricity Market (WEM) or by private contracts with certain other market participants. Akhil, Deepak

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Argentina : Power Sector 8

 Transmission is organized on a regulated basis.  Transmission companies are required to provide

third parties access to the transmission systems they own and are authorized to collect a toll for transmission services.  Transmission companies are prohibited from generating or distributing electricity.

Akhil, Deepak

December 5th 2008

Argentina : Power Sector 9

 Distribution involves the transfer of electricity from

supply points of transmitters to consumers.  Distribution companies may buy the electricity needed to meet consumer demand in the WEM or from contracts with generation companies.  Large users are divided [1,Annexe 17] in three different groups (GUMA, GUME and GUPA) in accordance to their power needs and the amount of energy contracted in the WEM.

Akhil, Deepak

December 5th 2008

Argentina : Dispatch and pricing 10

Generation companies sell their electricity to distribution companies and other large users in the competitive WEM through supply contracts or in the spot market at prices set by CAMMESA (“Compañía Adminsitradora del Mercado Mayorista Eléctrico Sociedad Anónima”, in english, Wholesale Electricity Market Operator Company).

Akhil, Deepak

December 5th 2008

Argentina : Dispatch and pricing 11

 CAMMESA shareholders are the generation,

transmission and distribution companies, large users (through their respective associations) and the SE (“Secretaría de Energía”, in english, Secretariat Energy).  All generation companies in the SIN (“Sistema Interconectado Nacional”, in english,National Interconnected System) pool electricity in the WEM.  Electricity is purchased from participants in the pool by distribution companies and other large users at the contractual, seasonal, or spot price. Akhil, Deepak

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Argentina : Dispatch and pricing 12

 The actual operation of CAMMESA involves the

dispatch of generating resources without regard to the contracts among generation companies and distribution companies or large users.  A generation company's capacity may be dispatched to provide more or less energy to the pool irrespective of its contractual commitments.  The generation company will be obliged to buy or sell excess energy from or to the pool at spot prices.  The spot price is an hourly price paid for energy and reflects the marginal cost of generation. Akhil, Deepak

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Akhil, Deepak

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Argentina : Price System 14

 Nodal Factors and Adaptation Factors  Payments to generators  Seasonal Prices for Distcos

Akhil, Deepak

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Lessons learnt from Argentina 15

 Mandatory separation of functions, and clear

delineation of the limits on cross-ownership and vertical integration.  Limits on the size of generators to ensure competition.  The unbundling of transmission charges and the provision of fair access to transmission.  Establishment of a centrally dispatched bulk supply market, with energy priced at the system’s marginal cost, and a parallel bilateral market based on longterm contracts. Akhil, Deepak

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ORISSA MODEL 16

 Orissa was the first state to embark on the reform programme

after the state Electricity Reform Act became effective in April 1996.  Orissa State Electricity Board is partially unbundled into three separate entities: OrissaHydro Power Corporation (OHPC – for hydro generation), Orissa Power Generation Corporation (OPGC – for thermal generation) and Grid Corporation of Orissa (GRIDCO – for transmission and distribution).  In June 1998, AES purchases 49% stake in OPGC. In the second phase, the distribution assets, properties and personnel of GRIDCO is broken into four distribution companies. BSES purchases three of them (NESCO, WESCO and SOUTHCO) in April 1999 and one (CESCO) is transferred to AES Transpower (joint venture of AES and Jyothi Structures Ltd) in September 1999. Akhil, Deepak

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CONTD… 17

 GRIDCO retains most of the past liabilities of distribution

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companies in order to conclude sale. Its cash deficit soars almost 40% between 1998-1999 and 1999-20003, and the company has difficulty covering operating expenses. Private investors bid for distribution companies based on assumptions contained in the information memorandum. Assets of distribution companies may have been over-valued because of underestimated losses (estimated at 35%, actually more than 50%; the 100% collection efficiency estimated is actually 83%)4. Bidders assumed that future tariff adjustments would balance any initial over-valuation. No transitional support to private distribution companies planned and turn-around expected in 2/3 years

Akhil, Deepak

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DELHI MODEL 18

 The Delhi Electricity Reform Act comes into force in March

2001.  Two months later, Delhi Vidyut Board (DVB, the state’s electricity board) establishes six shell companies (holding company, generating company, transmission company, three distribution companies) to be operationalised on transfer.  Distribution is first privatised. 51% of the equity in three distribution companies are sold to two privately owned Indian power companies, BSES and Tata Power.  DVB ceases to exist and is replaced by the holding company, the generation company and transmission company. Delhi government retains ownership of the holding, generation and transmission company Akhil, Deepak

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CONTD… 19

 Holding company retains all unserviceable liabilities.

Asset values of successor companies are pegged to serviceable liabilities. Existing serviceable DVB liabilities will be paid by successor agency after a four year grace period.  Introduced concept of aggregate technical and commercial (AT&C) losses, rather than transmission and distribution (T&D) losses.  Private investors bid for distribution companies on the basis of a five year AT&C targets, indicative multi-year tariff profile and projected Government assistance.  A five year transitional period with some Government support over the period Akhil, Deepak

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The Current Indian Model 20

Segments of Indian Electricity Market There are mainly Five segments of Power Sector:  Generation

Genco

 Transmission  Bulk Supply

Transco

 Distribution  Retail Supply

Disco

Akhil, Deepak

December 5th 2008

Prevailing Market Environment 21

 Generation– SEBs,CPSUs,IPPs,Captive.  Transmission– Open Access.

 System operator– (currently embedded with  

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CTU)– Key role in competitive market. Bulk Supply– Traders and Market Mechanism (Power exchange / Pool) Distribution– Phased Open Access. Retail supply– Multiple Licensees. CERC,SERCs– Monitoring market behaviour.

Akhil, Deepak

December 5th 2008

Market Mechanism 22

Bilateral Contracts:  

Direct contracting between counter parties, with optional balancing market. Generators responsible for dispatching contracted loads.

Pool Contracts:   

Generators sell electricity into a "pool" and suppliers purchase out of this pool. Market participants trade in the Pool against a defined set of rules. Variants: System Marginal Pricing (SMP) and Pay Bid Pricing.

Pool Process:     

Generators give their “supply function” for the next day (for each settlement period). The market operator schedules the units to minimize costs and meet the forecast demand The most expensive unit scheduled determines the “System Marginal Price” (SMP). All dispatched units receive the SMP and all available units receive a capacity payment. The “Pool Selling Price” is then proposed to buyers

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CS - 2

CS - 1

Regional Grid

RLDC Coordinate s

State - C

State - A

State - B Akhil, Deepak

MPP

CS: Central Station MPP: Mega Power Producer RLDC: Regional Load Dispatch Centre December 5th 2008

Market Mechanism 24

 Long-term generation capacity market

(Long term Open Access through Central Transmission Utility) 

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Capacity allocations in Central Sector Generation by Ministry of Power, Govt. of India Bilateral contracts between IPPs & Load serving utilities

 Short-term energy market (through system operator)  

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96 time blocks of 15 minute each Day-ahead scheduling of long-term bilateral contracts Day-ahead scheduling of short-term bilateral contracts (Non-discriminatory short-term Open Access)

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THANK YOU…….

Akhil, Deepak

December 5th 2008