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**General
Concepts & Definitions in reference to Tariff determination**

**(a) Auxiliary energy consumption:-**

The
quantum of energy consumed by auxiliary equipment of the generating station,
and

transformer
losses within the generating station, expressed as a percentage of the sum of

gross
energy generated at the generator terminals

of all the units of the generating station.

of all the units of the generating station.

__(b) Date of Commercial Operation’ or ‘COD’:-__

The
date declared by the generating company after demonstrating the maximum
continuous

rating
(MCR) or the installed capacity (IC) through a successful trial run after
notice to the

beneficiaries,
from 0000 hour of which scheduling process as per the Indian Electricity Grid

Code
(IEGC) is fully implemented, and in relation to the generating station as a
whole, the

date
of commercial operation of the last unit or block of the generating station.

**(c) Declared capacity:-**

The
capability to deliver ex-bus electricity in MW declared by such generating
station in

relation
to any time-block of the day or whole of the day, duly taking into account the

availability
of fuel or water, and subject to further qualification in the relevant
regulation.

**(d) Gross calorific value:-**

The
heat produced in kCal by complete combustion of one kilogram of solid fuel or
one litre

of
liquid fuel or one standard cubic meter of gaseous fuel, as the case may be.

**(e) Gross station heat rate:-**

The
heat energy input in kCal required to generate one kWh of electrical energy at
generator

terminals
of a thermal generating station.

**(f) Infirm power:-**

Electricity
injected into the grid prior to the commercial operation of a unit or block of
the

generating
station.

**(g) Installed capacity:-**

The
summation of the name plate capacities of all the units of the generating
station or the

capacity
of the generating station (reckoned at the generator terminals), approved by
the

Commission
from time to time.

**(h) Operation and maintenance expenses:-**

The
expenditure incurred on operation and maintenance of the project, or part
thereof, and

includes
the expenditure on manpower, repairs, spares, consumables, insurance and

overheads.

**(i) Plant availability factor (PAF):-**

The
average of the daily declared capacities (DCs) for all the days during that
period

expressed
as a percentage of the installed capacity in MW reduced by the normative
auxiliary

energy
consumption.

**(j) Conversion of MW into Million Units**

**(MUs):-**

1 MW =

__1MW x 365days x 24hr x PLF xAvail Factor x 1000__
1000000

**(k) Tariffs:-**

Nominal
tariff

Discount
Tariff

Levelized
Tariff

**Nominal Tariff:-**

The
tariff calculated at for each year (fixed cost + variable cost)

**Discount Tariff:-**

The
tariff calculated at present value of the future tariffs. This is done by
discounting future

tariffs
by discount rate (given by CERC)

Discount
tariff= Nominal tariff x Discount factor

**Levelized tariff:-**

The
tariff calculated for all years. This is a simple tariff representing the
tariffs throughout the

plant
life.

In
concept, this is “Weighted Mean” of all tariffs with weights as discounting
factors.

Levelized Tariff

__=____∑____Nominal Tariffi x ∑Discount Ratei__
∑ Discount Rate i

where

*i*varies from 1 to n.
n is
the life of plant

**Tariff determination exercise for a 500 MW Thermal Power Plant**

**Given Data:**

**SNO.**

**Particulars Parameter**

1 Capacity of
Plant
500
MW

2 Capital
Cost
4 Cr/MW

3 Debt Equity
Ratio
70:30*

4 Return on
Equity
15.5%*

5 Interest on
Loan
10%

6 Working
Capital (10% of Total Capital) 200 Cr

7 Interest
on working
Capital
10%

8 Depreciation
Rate
5.28%*

9
Operation and Maintenance cost
13 Lakh/MW*

10 Plant Load
Factor (PLF)
80%*

11 Plant
Availability Factor
85%*

12 Specific Oil
Consumption
10 ml/MW*

13 Price of Oil
Rs. 10,000/Kl

14 Gross
Calorific value of
Oil
10,000 Kcal/Lit

15 Station Heat
Rate
2,425 Kcal/Lit*

16 Cost of Coal
Rs.
1000 / Tonnes

17 Auxiliary
Power Consumption 6.50%*

18 Plant Life
(For thermal plant based on Coal)
25 Years

19
Gross Calorific value of coal 4000
Kcal/Kg.

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__Fixed Cost Component calculations__

__Fixed Cost Component calculations__

**(1) Return on equity**

Capital
cost/MW= Rs. 4 Cr

Capital
cost for 500 MW = 500 x 4= Rs. 2,000 Cr.

Normative
Debt/Equity Ratio= 70:30

Equity
= 30/100 X 2000 = Rs. 600 Cr.

Debt
=70/100 X 2000 = Rs. 1, 400 Cr.

RoE =
15.5% of Equity

15.5/100
x 600 = Rs. 93 Cr.

**(2) Interest on Loan**

10% of
Debt=10 /100 x 1400 =Rs. 140 Cr.

**(3) Interest on Working capital**

10% of
Working capital (Rs. 200 Cr.)

10/100
x 200 = Rs. 20 Cr.

**(4) Depreciation**

5.28%
of Capital cost= 5.28/100 x 2000= Rs. 105.6 Cr.

**(5) O & M Cost**

Normative
O&M Cost: Rs. 13 Lakhs/MW

For
500MW = 0.13 x 500= Rs. 65 Cr.

**Hence, Total fixed cost = (1)+(2)+(3)+(4)+(5)**

Rs.
(93 + 140 + 20 + 105.6 + 65) = Rs. 423.6 Cr. = Rs. 423.6 x 107

500 MW
= 500 x 365 x 24 x 80 x 85 x 1000

106

=
2978.4 Million Units (MUs)

=
2978.4 x 106

**Therefore, Fixed cost per unit**

=423.6
x 107 / 2978.4 x 106

=Rs.
1.42 / kWh

**Variable Cost Component calculations**

Calculation
of variable cost per unit:-

**(1) Specific Oil consumption**= 1 ml/kWh=1 x 10-3 l/kWh

**(2) Cost of Specific Oil consumption**= Specific Oil consumption x Cost of Oil/litre

= Rs 1
x 10-3 x lit x 10000 = Rs. 0.01 / kWh

kWh x
lit

**(3) Heat contribution of oil:**

=
Gross calorific value of Oil x Specific Oil consumption

=
10,000 x KCal/litre x 1 x 10-3 litre/kWh = 10 Kcal/kWh

**(4) Station Heat Rate**

= Heat
contribution of Oil + Heat contribution of Coal

Therefore,
Heat contribution of Coal = Station Heat Rate – Heat contribution of Oil

=
2425-10 = 2415 Kcal/kWh

**(5) Specific Coal consumption**

= Heat
contribution of coal

Gross
calorific value of coal

= 2415/4000
= 0.60 Kg/KWh

**(6) Cost of Specific Coal consumption**

Specification
Coal consumption x Cost of Coal

= 0.60
Kg. x 1000 Rs.

kWh x
Tonnes

0.60
Kg. x 1000 Rs. = 0.60 Rs/KWh

kWh x
1000 Kg.

**Hence, Total Variable Cost per Unit:**

= Cost
of Specific Oil consumption + Cost of Specific Coal consumption

= Rs.
(0.01 + 0.60) / kWh = Rs. 0.61 /kWh

__Notes:__
a) The
variable cost calculated above is the variable cost of generation.

b)
6.5% of the Power generated is consumed in Auxiliary. So, in calculating Power
available

Ex-bus
we have to subtract 6.5% of Available Power.

c)
Variable cost per unit at bus bar = Variable cost per unit

1 - %
Auxilliary consumption

= 0.61
= Rs 0.65/kWh

1-
0.065

__Nominal Tariff calculation:__

Nominal
Tariff = (Total Fixed Cost / Unit) + (Total variable cost (Ex-bus)/Unit)

= Rs (1.42 + 0.65)/Unit = Rs. 2.07/Unit

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