Common Paper

Discussion on Transmission Pricing Approach in Open Access Transmission System Ψ

Dr. Prem K. Kalra*, V. P. Singh , and Yogesh Bichpuriya* Dept. of Electrical Engg. , I.I.T. Kanpur ΨHAL India [email protected] (1) Introduction: The Electricity Act 2003 provides electricity market for private investments for increasing generation capacity and efficient network use in India. It encourages captive generation, non- discriminatory open access to transmission and distribution system and delicensing generation. The generators will be in direct contact with the customers and vice versa. If it is implemented properly, it will open the door for competition in the electricity supply. The Act provides economic base for the revolutionary change in the electricity sector. Although there is much distress on how to apply these recommendations in Indian scenario, the Act may introduce a new picture of Indian Electricity Sector. To meet the increasing demand of electricity there is great need of private investments in generation. The Act 2003 gives more relaxation to the generators by promoting delicensed generation and captive generation. The development of electricity markets is a global issue. India has also been progressing in this area by observing international experience. It is difficult to customize the international practices to fit in Indian scene due to local circumstances. Now let us look upon the Electricity Act 2003 provisions related to generation and open access transmission system. The Act states “1(47):‘Open Access’ means the non-discriminatory provision for use of transmission line or distribution system or associated facilities with such line or system by any licensee or consumer or a person engaged in generation in accordance with the regulation specified by the appropriate Commission.” “1(36):‘Inter-State Transmission System’-includes i) any system for conveyance of electricity by means of main transmission line from the territory of one State to another State; ii) the conveyance of electricity across the territory of an intervening State as well as conveyance within the State which is incidental to such interstate transmission of electricity; iii) the transmission of electricity within a State on a system built, owned , operated, maintained or controlled by CTU.” 7. Any generating company may establish, operate and maintain a generating station without obtaining a licence under this Act if it complies with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73.

9. (1) Notwithstanding anything contained in this Act, a person may construct, maintain or operate a captive generating plant and dedicated transmission lines: Provided that the supply of electricity from the captive generating plant through the grid shall be regulated in the same manner as the generating station of a generating company. (2) Every person, who has constructed a captive generating plant and maintains and operates such plant, shall have the right to open access for the purposes of carrying electricity from his captive generating plant to the destination of his use: Provided that such open access shall be subject to availability of adequate transmission facility and such availability of transmission facility shall be determined by the Central transmission Utility or the State Transmission Utility, as the case may be: Provided further that any dispute regarding the availability of transmission facility shall be adjudicated upon by the Appropriate Commission. “38(2) the function of Central Transmission Utility shall be – (a)…… (b)…… (c)…… (d) to provide non-discriminatory open access to its transmission system for use by (i) any licensee or generating company on payment of transmission charges; or (ii) any consumer as and when such open access is provided by the State Commission under sub section(2) of Section 42, on payment of transmission charges and a surcharge thereon as may be specified by the Central Commission: Provided that such surcharge shall be utilised for the purpose of meeting the requirement of current level of cross-subsidy: Provided further that such surcharge and cross subsidy shall be progressively reduced and eliminated in the manner as may be specified by the Central Commission: Provided also that such surcharge may be levied till such time the cross-subsidy or not eliminated: Provided also that the manner of payment and utilisation of surcharge shall be specified by the Central Commission: Provided also that surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.” “39(2) the functions of the State Transmission Utility shall be (a) ………… (b) ………… (c) ………… (d) to provide non-discriminatory open access to its transmission system for use by (i) any licensee or generating company on payment of the transmission charges; or (ii) any consumer as and when such open access is provided by the State Commission under sub-section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be specified by the State Commission:

Provided that such surcharge shall be utilised for the purpose of meeting the requirement of current level of cross-subsidy: Provided further that such surcharge and cross subsidy shall be progressively reduced and eliminated in the manner as may be specified by the Central Commission: Provided also that such surcharge may be levied till such time the cross-subsidy are not eliminated: Provided also that the manner of payment and utilisation of surcharge shall be specified by the Central Commission: Provided also that surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.” “40.It shall be the duty of a transmission licensee (a) ………… (b) ………… (c) to provide non-discriminatory open access to its transmission system for use by – (i) any licensee or generating company on payment of the transmission charges; or (ii) any consumer as and when such open access is provided by the State Commission under sub-section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be specified by the State Commission: Provided that such surcharge shall be utilised for the purpose of meeting the requirement of current level of cross-subsidy: Provided further that such surcharge and cross subsidy shall be progressively reduced and eliminated in the manner as may be specified by the Appropriate Commission: Provided also that such surcharge may be levied till such time the cross-subsidy are not eliminated: Provided also that the manner of payment and utilisation of surcharge shall be specified by the Appropriate Commission: Provided also that surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.” “42 (2) The State Commission shall introduce open access in such phases and subject to such conditions, (including the cross subsidies, and other operational constraints) as may be specified within one year of the appointed date by it and in specifying the extent of open access in successive phases and in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies, and other operational constraints: Provided that such open access may be allowed before the cross subsidies are eliminated on payment of surcharge in addition to the charges for wheeling as may be determined by the State Commission: Provided further that such surcharge shall be utilised to meet the requirements of current level of cross within the area of supply of the distribution licensee: Provided also that such surcharge and cross subsidies shall be progressively reduced and eliminated in the manner as may be specified by the State Commission:

Provided also that such surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.” The important points to implement the recommendations given in the electricity act 2003 are1. Formation of CTU/STU, ISO 2. Promotion to generations 3. Appropriate pricing methodology 4. Available Transfer Capacity 5. Congestion management 6. Surcharge calculation 7. Online information flow (2) Independent system operator: The independent system operator will play an important role in the load dispatch, load management, grid management, energy accounting, settlement and clearing. The ISO would not be involved in doing business of transmission of power in non-discriminatory open access. The ISO would design and implement information system to flow the required information to different electric utilities. This information system can be implemented by the observing the implemented system in developed countries such as open access same time information system (OASIS). This system would be online information system and would be used for managing transactions, effective monitoring, load dispatch, energy accounting and to provide current information of the ATC and the transmission system status to different electric utilities. CERC has given guidelines about the formation of central transmission utility/ state transmission utility. (3) Promotion to generators: According to section (7) of the Electricity Act 2003, any generating company may establish, operate and maintain a generating unit (except hydro-generating unit) without obtaining license under this act if it complies with the technical standards related to the connectivity of the grid. The Act provides more facilities to the captive generating plants. It provides open access for carrying power to the point of use from the generation point without any charge. The captive generator may construct, operate and maintain dedicated transmission link for carrying electricity while maintaining the grid regulation. (4) Methodologies for Transmission pricing and wheeling Like other commodity the buy or sell of electricity is now open for all in the Act 2003. In a market, determination of price for any service or commodity has significant importance to create competition among the sellers and the buyers of the service or commodity. Unlike any other commodity, the storage of electricity is not possible to a large extent. Once it is generated it should be transmitted simultaneously. In our country the demand is more than the supply so to increase generation the generators should be encouraged to take interest in the electricity market. They could be attracted by reasonable pricing and

ensuring the return while protecting the consumers’ welfare. The pricing method should be sufficient to fulfill the following issues. 1. It should be non-discriminatory and the charges for transmission service for all generators are in a comparable manner. 2. The region wide transmission cost should be shared among the generators in the region in an equitable proportion. The transmission pricing and wheeling charge will reflect the effect of the generator on transmission facilities. 3. It should recover the fixed cost of transmission facilities. 4. It should encourage new generators to be established in area which serve to reduce the constraints over an interface. 5. There should be proper monitoring of loop flows within the region. 6. It should be beneficial in open access transmission system where the periodically updating of transmission system cost is needed for declaring market price. The method should be simple and fast so that the revision of the market price will not take much time. In open access transmission system the pricing is a critical issue. The states in India are not agreed upon a common method for transmission pricing and wheeling charges. Same is also case in the international region. There are several methods of transmission pricing- such as postage stamp method, location based marginal pricing, contract path method. These methods have been tried in different countries. In the open access environment most of the countries adopt the location based marginal pricing method. It is an advanced pricing model, based on distance-based pricing to model the relationship between demand and load flow in the transmission network and to price each location in the network according to costs imposed on the system through location marginal consumption. For allocating common costs, economic optimum is to charge a price inversely related to elasticity of demand (Ramsey pricing). It is more conventional to allocate costs along accounting lines. For e.g. according to share in total consumption. The nodal pricing approach manages congestion and sets transmission prices through a centralized energy market based on economic dispatch. The basic idea of the method is to organize the market as a pool in which generators and loads submit hourly bids for node specific injections and withdrawals of power to an Independent System Operator (ISO) with full coordination and price setting authority. In this pricing ISO also minimizes the total system’s gain from trade, subjected to transmission and reliability constraints. Although this method is a powerful tool for applying open access in transmission and gives sufficient economic signals but it seems to be ambitious for India because of the lack of information required and others applicability problems. CERC recommended two alternatives for transmission pricing for open access viz. contract path method and incremental postage stamp method. These approaches can be briefly explained in the following lines.

(4.1) Contract path method Contract path-pricing calls for transmission from point A to point B based on the cost of single identified path. The price includes a capacity charge to cover the capital costs, and energy charges based on losses and other operating costs. Suppose two parties want to move 400 MW of power between two points, and choose a transmission line as “contract path” between the two points, then even knowing that the power will actually move on different parallel paths between the two stations, they calculate the costs to be paid based on this “contract path”. This method requires the identification of the supply and the receipt point for a bilateral transaction and a “contract path” between the two nodes. This method directs the amount of contracted capacity as well as the distance associated with the contract path. In this method the network charges are allocated to individual transaction. The contract path is fiction path method. The physical load flow of a single transaction may be different from the contractual load flow, particularly in the meshed electricity network. Transmission pricing becomes complex when electricity does not flow over the contracted path. The problems associated with this method are the direction of the load flow, congestion management, allocation of charges for ancillary services and system control for single transactions. The problem related to the contract path due to parallel path flow can be understood by the following example: In this figure the points A and D are the points of supply and demand respectively. If the path A-B-D is nominated as a contract path for the transaction and it carries only some of the contracted capacity and the remaining are flowing in the parallel path A-C-D. If the impedance of path A-C-D is lower than that of contracted path A-B-D, the former carries a greater part of the contracted capacity. While the path A-C-D is not a contracted path so C is not paid for this transaction. This example shows that why the contract path is unfair. C

D A

65% 35%

B

The other problems associated with contract path include: 1. Fixed cost of transmission network are not recovered 2. Pricing manipulation 3. Difference between short term and long term prices 4. Calculation of available transfer capacity is difficult 5. Transmission affects the other parallel paths in the electricity meshed networks. Power can flow on different paths depending upon the generation schedule. (4.2) Incremental postage stamp method: A postage stamp rate is a flat per kW charge for network access within a particular zone, based on average system costs. Postage stamp transmission tariffs allocate total system costs to consumers on the basis of load share/Energy share: a customer pays a transmission charge equal to the total system cost-weighted according to their consumption divided by total consumption. This method results in higher costs above marginal costs because it incorporates historical fixed costs. The cost for transmitting power within the zone is independent of the transmission distance. A generator transmitting to a load in a different zone would have to pay the postage stamp charges for the zone of origin and the zone of delivery, and also any intervening zones. This accumulation of zone access charges is often called “pan-caking.” Although transmission within a zone is independent of distance, longer distances increase the likelihood that more than one zone will be crossed, which would increase the total transmission cost. CERC added the incremental postage stamp rate assigned to a zone to make this method distance sensitive. According to CERC such rate can be assigned by drawing grid lines 100 Km apart on the map of India from north to south and from east to west. The wheeling charges could also be comprehended as the crosses the square zone of 100x100 Km, provided that the circuit path is straight and parallel to the side. Although postage stamp rates provide a way to recover the fixed costs of the network, but they provide no information about congestion. (4.3) Proposed method for transmission pricing and wheeling charges: In the open access transmission system to develop a pricing scheme is a critical issue. There is a need of appropriate method for transmission pricing which may make connection between transmission service pricing and the physical effects of generation on the transmission system. The physical effects of the generators on the transmission system are determined by calculating power flows out from generators into the transmission system. In the MW-mile method rates explicitly reflect the fact that the cost of transmission depends on the distance the power transmitted and how much power is transmitted. Megawatt mile pricing involves load flow analysis to model the power flows on the transmission network to determine transmission charge. These distances, power flow and other parameters if computed correctly, more accurately reflect the impact of a transmission arrangement on the system.

In this method the costs are allocated among the users by assigning a transmission support payment responsibility to each generating unit in proportion to its impact on the transmission system. The MW-mile on each line is calculated by multiplying the MW impact on the line to length of the line. The total MW-mile value for a generator can be calculated by summing all the line’s MW-mile values in a region. Once the initial calculation of megawatt-mile use for each generator is done, it will stand until a significant change occurs in the configuration of the transmission system. The addition of a new generator without any change to the transmission system will only require one load flow, and a revision in the fractions used to determine cost responsibility of the existing generators. The region-wide cost-of-service study could be updated periodically based on application of the methodologies established initially, and the cost of transmission system upgrades could be recognized in updated studies. While calculating the load flows associated with each individual generator in a region, a base case load flow study give a reference case. A second load flow study for each generator is then done for each transaction. This gives the incremental power flows in the lines near the generating unit, these incremental power flows in the lines reflect the operation of the unit. These incremental power flows are then used to calculate the percentage of the generator’s output that flows on various transmission lines affected by that generator. Studies suggest that some adjustment factors be applied to the MW-mile method makes it suitable for calculating the charges for other transmission facilities. Although specific adjustment factors have not been determined, the MW-miles of the transmission system use determined initially by the load flow analysis will be increased where the flow of power from the generator serves to constrain the interface and conversely, the MWmiles will be decreased if the flow of power from the generator across a transmission interface serves to relieve the constraint across a transmission interface. Thus this can be made to acknowledge congestion management. Such adjustment factors will be expected to establish important price signals for consideration in siting of new generating units. Separate adjustment factors will be established for each utility to reflect the different cost of each owner: Adjustment Factor =1 >1 <1

Lines Affected For an overhead line in which the flows of power do not adversely affect a restricted interface. For lines in which the flows of power increase the constraint on a restricted interface. For lines in which the flows of power alleviate a constraint on a restricted interface.

(5) Congestion management:

Congestion results when power flows in the transmission line are higher than allowed by the operating reliability limits. In other words, congestion occurs due to the operating constraints of the transmission lines. These constraints are: 1. Voltage constraints 2. Thermal constraints 3. Stability constraints Congestion management means the activities of the transmission system operator to relieve transmission constraints. Congestion management must always be possible, because it is being a key issue for the system reliability. Since schedules and power flows are not the same, there may well be discrepancies between these two characterizations of congestion. The power flow definition is the one that is most realistic. Congestion management is a simple concept that is very difficult to execute, since it must be done in a dynamic, nearly real time manner to be most effective. Whenever congestion occur the system operators should: 1. Force changes in generation schedules, ordering some generating units to increase their generation and others to reduce output, until the congestion is eliminated. 2. Compensate the units who were asked to generate more, effectively paying them for their additional power production, and the units who were ordered to cut back, granting them “lost opportunities payments”. 3. “Sends the bill” for compensation payments to the users who caused the congestion in the first place, raising transmission prices during the congestion, by collecting “congestion fees” to compensate affected generating units. Congestion management works well when congestion charges are focused directly on the transmission users most responsible for the congestion, rather than spread over all users. In the load flow analysis the physical impact of the generating unit on the transmission lines can be computed. This provides the information about the responsible transmission users for congestion. Congestion charges should be computed using appropriate analysis and focus specifically on the causes of the congestion, assigning the full cost of the congestion compensation directly to the people whose generation-load combination is creating it. This leads to all the right price signals, both short- and longterm. The Transmission pricing based on contract path would create following problems for transmission & wheeling charges as well as congestion: a. Contract path may be different from the path of actual power flow particularly in a meshed electricity network. b. In the contract path approach the congestion may not be identified before the real time operation, it is very difficult to manage the congestion problem for reliable operation and system security. c. The schedules that are determined by the contract path and the other commercial approach may create real time problems. The real time

problem occurs while paths were given scheduling limits during the path rating process and the change in generation pattern changes the actual power flows in the transmission lines. d. For the unscheduled flow problems on the parallel paths in a meshed network are managed through Unscheduled Flow Mitigation Plan (UFMP). The UFMP includes readjustment of the transmission schedules by system operator and curtailment of the schedules that causes congestion. These operations are the real time operations. It is very difficult to properly adjust the curtailment of the schedules for the congestion relief in contract path method. It is not a market solution to cut the schedules by the system operator. e. There may be a case that transmission capacity may be unused in the short term when there is no ATC in the long term because the scheduling do not correctly indicates the actual flows on the paths. The effective available transfer capacity would not be posted on OASIS as available for sale because of the difference between the contract path based schedules and the actual power flows on the line. The system operator would not determine the accurate ATC and therefore the system would not be used efficiently. The load flow study give the information about the power flow in the lines, this would be helpful to evaluate more accurately the transmission constraints of a line that could threaten system reliability. But in contract path this will be difficult. f. In real time the losses will be different than the contracted one as losses will depend upon the real power flow. Congestion management in different countries is shown in the table. Country Chile Argentina England and Wales Norway

New Zealand

PJM

Energy market Congestion management (Transmission pricing system) Pricing system based on marginalBy separating regional prices supply costs Nodal pricing system By separating regional prices Spot market without locallyCost of transmission constraints differentiated energy prices recovered as a surcharge Zonal spot market- prices based onCongestion price is calculated as bids the difference between unconstrained balance price and constrained balance price Location based marginal pricingDifferent prices for different system network constraints- thermal, voltage/reactive power and spinning reserves Hourly location based marginal pricingFirm contracts are charged for system congestion costs and non-firm customers pay charges

WEPEX (US)

Zonal spot market

ISO defines the congestion charge as the difference in zonal prices

The international experience in the congestion management in open access transmission system shows that most of the countries have been adopting the location based marginal pricing method for calculating transmission charges. But in India due of lack of information needed this method can not applied to calculate the transmission pricing so a Congestion Management methodology with MW-Mile Transmission pricing approach should be adopted. Apart from the congestion pricing approach, the approach related to transmission rights has also been used to manage congestion. There are two proposals present in the literature that could be useful in congestion management. 1. “No Grandfathering of Transmission Rights” This proposal being used at the CAISO includes the congestion management approach. This proposal does not give any advantage of limited transmission capacity to generators irrespective of the time period to be connected to the grid. A new generator may produce power at a lower cost and hence may have ability to bid for available transmission capacity. This proposal treats all generators in a non-discriminatory manner. Congestion is also not ascribed to any generator regardless of its in-service date. 2. ACCM This proposal favors the grandfathering of transmission rights. The transmission rights that exist before connection of a new generator to the grid are presumed to belong the existing generator. This is the essence of grandfathering and represents a barrier to market entry. A newer generator would have more cost efficient generation, thereby resulting in the lowest price for the end consumer. This approach allows the newly connected generator to use the available transfer capacity. A concept of a local area control is introduced in some part of the world. In this local area the participants that do not only wish to own generation would be included. In this approach the real time imbalances are solved to a great extent. In this area net load and generation variations are locally balanced. These control areas are allowed to borrow energy from its neighbors during expensive hours and repay it during the cheap hours. For getting the competitive advantage of this control area concept the generators are forming new control areas. Although these control areas may increase the complexity of the scheduling and risk to reliability, in those countries the generators have been enjoying the commercial advantages of these control areas. (6) Available transfer capacity As the name indicates itself ATC gives the information about the available transfer capacity of the transmission line in a certain direction without violating the security constraints. It is the measure of the transfer capability remaining in the physical transmission network for further commercial activity, over and above already committed uses. In short, the ATC developed by transmission-owning entities must give a viable and reliable method for which other market participants can utilize any available transfer

capability. Incorporated in this, transmission owners must develop an ATC calculation strategy that allows for reasonable uncertainties in system conditions and affords reserve capacity to address emergency situations. ATC calculation depends on the current power flow, steady state stability, voltage stability and transient stability limits. The first step in ATC calculation requires the base case load flow for the reference case. For each transaction load flow analysis gives the value of incremental power flow in the transmission lines. ATC must recognize timevariant power flow conditions and the effects of simultaneous transfers/parallel path flow from a reliability viewpoint. The static and dynamic ATCs are required to be computed for the secure operation. But there may be more complexity in determining the nonlinear constraints. There is a need to adopt fast, accurate algorithms to compute the ATC in the open access environment where the frequent transactions are accepted to be occurred. There are various softwares available in the market to calculate the ATC, but the problem is to examine that which one is proved suitable for Indian systems or to develop new software for calculating the real time ATC. (7) Surcharge calculation Surcharge is levied on different utilities to meet the current level of the cross-subsidies. These charges are levied till the cross-subsidies are not eliminated. These surcharges and cross-subsidies are reduced progressively and eliminated thereafter. The calculation of these charges is the responsibility of the central commission. The central commission should keep in view the information provided by the state commission in this regard. (8) Online information flow To create market condition in the electricity sector and for the non-discriminatory open access it is necessary that all the market players should have the required information. System operators would post the information about the existing transmission network and invite bidding from the generators. The system operator would also provide the information with regard to the total transfer capacity (TTC) of the grid lines, updated available transfer capacity (ATC) to the open access customers. The information would be updated on hourly or half-an hourly basis and it will be available online to transmission system users. The scheduling of generators and current status of various grid lines should also be available online. This online information flow requires the use of various IT tools. IT tools not only reduce the amount of time but also it take a participant to execute its market strategy and they can also reduce the potential for errors. Market participants need an IT system that will provide all constituencies with the operation data. IT needs from a single central repository that is accessible by everyone from traders to plant managers. Automating the information that defines this relationship reduces the potential for error and minimizes the Market participant’s time to market. The information system implementation should include the real time operation in open access system. OASIS (open access same time information system) used in many countries gives an idea about the required information flow. The thing may seem to implement because of lack of data required from the various utilities involved in the open access transmission system.

(9) What is left? In the Electricity Act 2003, there is no indication about the ancillary services. In open access system the need of ancillary services has been experienced by many countries. In a vertically integrated system there is a single centralized authority which has control over the various activities on the grid. Thus there is no requirement for a separate provision for services but in open access environment these services should be added to the services provided by the system operator. Ancillary services 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. Some of the ancillary services are: 1. 2. 3. 4. 5. 6.

Scheduling and dispatch control, Frequency control, Voltage/reactive power control, System stability control, Operating reserve service, Black start capabilities, etc.

In the deregulated market the ancillary services become significant because the system operator will maintain the reliability of the operation. In open access system the charges for such services are important for the proper functioning of the system. These charges may not always include in the transmission pricing because the provision of ancillary services are not directly associated with the costs included in the transmission pricing such as operation, maintenance, depreciation and return. These charges are levied for the various ancillary services provided by the system operator. Ancillary services in various electricity markets Service NGC Svenska Kraftnat NEMMCO NYISO Scheduling Recognized andScheduling andNot recognized Recognized and and dispatch,provided dispatch not provided by system recognized NYISO control Voltage Recognized andNot provided byRecognized andRecognized and support provided ISO paid to generatorspriced based on services through and synchronousembedded costs to Grid code compensators only generators only Regulation Provided Primary regulationRecognized andRecognized and and through thethrough bilateralcompensated priced based on frequency balance service contracts, secondary market response regulation through service the balance service

Operating reserve services

Within the purviewRecognized of the balancecompensated services

andRecognized and priced based on market

Black startProvided capability service

Provided throughRecognized bilateral contact compensated

andRecognized and price based on embedded costs

(10) Conclusion: Open access and Inter state transmission are great issues of debate in power sector after Electricity Act 2003. A lot of methods have been tried in the world regarding the Transmission pricing and wheeling charges but for Inter state transmission the methodology which suits Indian scenario for most efficient network use is MegaWatt Mile method. Main reason is that there are lot of drawback in the Postage Stamp method and inapplicability of the Nodal pricing method. Besides this, for handling the congestion, MW-Mile suits more than the Postage Stamp method. The Ancillary service should be paid more attention and incentive in open access scenario. The international practices show that Ancillary services are also treated as a source of generation of power. Promotion should be given to such types of service in Indian scenario also. References: 1. Electricity Act 2003, published by Ministry of Power, Govt. Of India. 2. Concept Paper on “Open Access in Inter-State Transmission” published by Central Electricity Regulatory Commission, India. 3. K. Bhattacharya, M. H. J. Bollen, and J. E. Daalder, “Operation of Restructured Power Systems” 2001, Kluwer Academic Publishers. 4. L. Philipson and H. L. Willis, “Understanding Electric Utilities and DeRegulation” 1999, Marcel Dekker, Inc. 5. “Review of Australian Transmission Pricing” published by London Economics, July 2003. 6. “Congestion Management White Paper” by William Engelbrecht (Sempra Energy Resources).