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LOAD RESEARCH IN REFORMING INDIAN UTILITIES – POLICY_ REGULATORY

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LOAD RESEARCH IN REFORMING INDIAN UTILITIES – POLICY_ REGULATORY Powered By Docstoc
					                                      Distribution Efficiency and Demand Side Management (DSM)
                               Distribution Reform, Upgrades and Management (DRUM) Training Program




        LOAD RESEARCH IN REFORMING INDIAN POWER UTILITIES – POLICY,
          REGULATORY, INSTITUTIONAL AND EFFICIENCY IMPERATIVES1

                                        S. Padmanaban
                             Senior Energy and Environment Advisor
                                          USAID/India

Introduction:

Over the past seven years since the power sector reform process commenced in India,
several important and long lasting developments have taken place. Associated with
these developments are organizational changes as a result of sector unbundling, the
establishment of central and state electricity regulatory commissions, emerging role of
IPPs and the privatization of power distribution. These developments whose objectives
are to establish and maintain sound and enduring commercial practices, reduce losses,
eliminate waste and inefficiency are gathering momentum. With this growing movement
are additional incremental changes that tend to further broaden and deepen the process
of reform. These generally reflect the changing functionality of utility operations to
include improved systems that enhance effectiveness and efficiency. A case in point is
Load Research (LR) which has emerged as an extremely important function to
understand and quantify the behavior of classes of customers so that management
decisions of the utility can be made more confidently. It serves to bridge the requirement
for reliable and accurate data by the regulators and the ability of the utility to respond to
such requests.

The Association of Edison Illuminating Companies (AEIC) defines load research as “ an
activity embracing the measurement and study of the characteristics of electric loads to
provide a thorough and reliable knowledge of trends, and the general behavior of the
load characteristics of the more important electrical services rendered by the electrical
utility industry”. In simpler terms, load research allows electrical utilities to study the
ways their customers use electricity, either in total or by individual end-uses. Its
activities require the talents of many disciplines including engineering, statistics,
computer programming, and marketing.

Put in another way, LR is the study of the customer load. Typically electrical meters
record the amount of energy consumed (and several other electrical parameters) each
15 minutes and the collection of readings (96 readings for the day; 2,880 readings for a
30 day month) are stored on computer as a data set. Data sets for similar customers
are combined and analyzed by software programs. The data sets are obtained through
a load research survey, which in turn is based on a statistical sample of customers in


1
 Background Paper presented at the Round Table on Load Research organized by the Energy Training Program
Alumini of India (ETPAI) and sponsored by USAID/India; September 1, 2000; New Delhi.

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                                 Distribution Efficiency and Demand Side Management (DSM)
                          Distribution Reform, Upgrades and Management (DRUM) Training Program


each rate or tariff class. From this performance of samples, estimates of the behavior of
the whole population are made.

Why is LR important for reforming Indian utilities? There are several important reasons
but the main one is that LR permits the utility to base its planning in key functional areas
on verifiable and accurate data and improves the quality of regulatory liaison between
itself and the commission. Data obtained through LR permits a utility to perform:

          Electrical demand side management
          Rate design
          Engineering design of T&D upgrades
          System dispatch
          Cash flow planning
          Customer service programs
          Improved Regulatory liaison


While it is clear that LR has several major applications in utility operations, this paper
focuses somewhat more on its relevance to Demand Side Management (DSM)
planning in India. This is not to underestimate the very broad and powerful impact that
load research could provide across a spectrum of utility functions, but merely to single
out an important application of singular importance in the Indian context. The paper is
divided into five sections beginning with this Introductory section. This is followed by a
section on LR and DSM. The third section is on the impact of LR in advancing and
strengthening the regulatory function. The fourth section is on how to institutionalize LR
in a reforming utility. And the concluding session discusses briefly the resource
considerations of a LR program.


DSM and Load Research

Historically in India and most of the world, electrical utilities have been supply-side
oriented with primary emphasis on expanding system capacity, including generation,
transmission and distribution, to meet the rapidly growing demand for electricity. This is
however changing and with the on-set of reforms, for instance in India, there is growing
optimism that the supply-side orientation or mind set of the past will give way to a more
balanced and symmetrical approach towards generation, T&D and end-use. The last
mentioned, namely, improvements in end-use efficiency among customers is the basis
for DSM and energy efficiency programs.

Briefly put, DSM is the control of customer load to improve utility operations. DSM
programs match customer consumption patterns of electricity, ie. load characteristics,
as closely as possible to current or projected capabilities of the power supply facilities.
By controlling customer loads, DSM seeks to manage the system peaks and valleys.


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The goals are to reduce the system or regional peak and to increase the off peak usage
of energy.

LR supports DSM by providing the data - base of customer load profiles that are used to
develop and analyze various DSM plans. Load research data can be the source of
valuable individual customer and class information used in the DSM planning process,
which basically involves a four step process: a) identification of system demand and
power supply objectives, b) analyzing various customer programs available to meet
these objectives, c) designing a strategy for program implementation, and, d) assessing
program results.

In the context of DSM planning in India, load research and analysis could focus on
questions such as:

          Given the supply constrained system, how much “demand” can the proposed
           DSM program actually control?;
          How could load research help in accurately estimating T&D losses in system
           networks?;
          How often and how deep can demand be clipped (reduced, dropped) or
           shifted?;
          How big does a proposed DSM program have to be to obtain a desired
           amount of controllable load?;
          Identification of DSM programs and their ranking;
          How does the proposed DSM program compare to supply side (generation
           and interconnection) alternatives?;
          How demand and consumption patterns change over time (years)?
          How sensitive is the proposed program to its assumptions?. If the
           assumptions change in the next year, does the program become more
           beneficial, or less beneficial?

LR is also used after a DSM program is established to check on the effectiveness and
impact of the program. This analysis focusses on such questions such as:

          Did the anticipated benefits actually occur?
          Has the customer load patterns changed such that the DSM program needs
           to be modified, expanded or cancelled?

Besides DSM, load research has many other applications. An extension of LR is to
study regional power flows on the transmission system. Analysis of the data reveals the
energy consumption (level, seasonal variation, rate of growth, etc.). Such data is useful
in generation and transmission planning, and supplements on-line data from SCADA
systems. In the US for instance, load research information, initially collected to comply
with governmental regulations (e.g., PURPA, FERC) and for rate-making applications,



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                                 Distribution Efficiency and Demand Side Management (DSM)
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has broadened to include such areas as forecasting, marketing, load management, and
distribution engineering.


Load Research and Regulation

As discussed earlier LR emerged as a discipline when state public utility commissions in
the U.S. required electric utilities to apply econometric and statistical techniques in rate
design and in the allocation of the costs of generation and T&D facilities among the
various classes of service. Therefore, obtaining accurate load data is critical to forming
accurate cost allocations and in rate design and supporting these before regulators and
intervenors in rate proceedings.

The Regulatory group of the utility uses customer load profile data in dealings with the
regulatory agencies. Such information provides factual data about customers;their past,
current and future load profiles and the basis on which the utility has developed its
submissions for tariff rate appeals. Experience in the US has shown that load research
information greatly advances discussions with the regulatory commisioners and their
staff by providing factual data whereas in the past there may have been assumptions or
judgements.

This is an important lesson for India where the SERCs have been recently established
and indications are that the regulatory staff in some instances have not been entirely
comfortable with the type, quality (accuracy) and reliability of information provided.
Measurements of customer loads, when used in discussions with the regulatory
agencies reinforces the understanding that the utility (Transco/Disco) is aware of and
concerned about the needs and actions of the customers.

As earlier discussed the LR program benefits all parties. From the LR program, the
utility management and staff can receive proposals for DSM programs, tariff changes
and capital improvements that are based upon field data. The regulatory commission
benefits from LR because the commission and its staff can review the proposals from
the utility, and discuss the proposals with the knowledge and confidence that these
were developed in a systematic and scientific manner with accurate field data. And the
customers will benefit because DSM programs, tariff changes and similar utility
decisions were considered in the light of field data about the load profile of customers.

 Initiating the load research activity in an utility requires some degree of prior
consultation and dialogue between the regulatory group of the utility and the regulatory
commission. The management of the Disco/Transco could advise the regulatory
commission of the load research program. The utility would receive from the
commission an indication (letter, comment, directive, etc.) supporting the operation of a
LR program in the company.



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The above discussion presents LR as meritorious. However, it must be clearly
understood that LR itself does not directly contribute to generating and delivering
electricity to customers. LR is an overhead cost in the utility and must be recognized as
such. If the commission does not approve the existence of a LR function in the utility,
then at some time in the future the capital and operating costs of the LR program may,
a) be challenged by an intervenor in a rate filing case, b) may be unilaterally cancelled
by the management of the utility. In order to offset this possibility and in view of the
multifaceted advantages that LR has on all the parties (Utility, regulatory commissions,
customers, etc) the LR program should be appropriately supported by a regulatory and
policy framework within the utilities and by the regulatory commission.


 Institutionalizing LR in a Reforming Utility

Institutionalizing the LR function in a Disco/Transco is a key decision that needs to be
undertaken at the reform stage. In the Indian context, given the opportunities for DSM
programs and their favorable technical and economic viability, it could well be that the
LR function could be the nucleus for the utility’s DSM programs. Thus, LR could be
used to generate and analyze data for the design, development and impact monitoring
of load management projects. There could be other locations within an operating utility
where the LR group is situated. Utilities that require load studies for rate-related
purposes are more likely to locate the LR function within the tariff or regulatory
organization within the company. Again, distribution utilities that plan rapid expansion of
their network could locate the LR function within their design engineering department.

In some cases, the LR activities may be located in more than one area. It is important to
note that, as operating environments change over time, the LR function may be moved
within the company to more efficiently satisfy company objectives at near-minimal costs.
For instance in India with the emphasis on improving the metering and billing systems,
many utilities at the early stages of reform have launched major projects to update and
replace old deficient meters in customer premises. It is possible that some of the new
meters could be chosen to incorporate load recording capability in addition to their
normal energy recording function. The LR function can thus be built on the reforming
utilities metering program at a fraction of the cost that it would normally take to build a
LR program from scratch.

A final point on the LR function and the organizational structure needed to support it.
The LR function can be separated into two major functional areas: data collection and
data analysis. The data collection function includes issues relating to metering, data
translation, validation, editing, and data administration. The data analysis function
includes sampling, data processing, standard and specialized analysis and reporting.
Because of the massive amounts of data involved, those doing the data collection
usually are not heavily involved in data analysis. Personnel attempting to perform both
data collection and subsequent analysis are serving two masters and generally diminish


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                                 Distribution Efficiency and Demand Side Management (DSM)
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the effectiveness of both functions. For this reason, separate groups within the load
research organization are usually responsible for data collection and data analysis.

Resources for Load Research

Though LR is over forty years old as a discipline, it has significantly advanced in the
past thirty years by the use of recording equipment and computer analysis programs.
Over the past thirty years the technology of recording has evolved: printed paper tape,
punched paper tape, open reel-to-reel magnetic tape, magnetic tape cartridges,
magnetic tape cassettes, solid state cartridges, telephone access, and radio access. All
but the last two methods required a person to visit the customer service location each
month. With the last two methods the data is retrieved automatically over a
communications channel (telephone or radio), increasing the turn around time,
improving data accuracy, and lowering the operating cost. Over the same time period
computer analysis techniques have evolved and improved: interpreting ink on paper
charts, batch programs on main frame computers, interactive programs on main frame
computers, stand alone personal computers and now, networks of personal computers.

Resources for LR can be grouped into four areas:

          Data collection equipment
          Data translating/reformatting equipment
          Database storage and analysis systems
          Human resources

Data collection equipment: A prime consideration in a LR program is the equipment
that collects the load profile data. For a LR project, three pieces of equipment are
installed for each customer: a watt-hour meter, a pulse initiator, and a recorder. These
could be combined into one multi-functional unit. Subsidiary equipment for data
retrieval, testing and maintenance must be considered.

Data translation equipment: Translation refers to the process of transforming the field-
recorded data into information that can be stored on the utility’s central computer
database.

Database storage and analysis systems: Most US utilities use minicomputers for
translation and mainframe computers for analysis. Translated load data stored on a
minicomputer, disk, or computer tape, are transferred to the utility’s mainframe
computer. In the mainframe, the load data are stored in a database where they may be
edited and analyzed. The mainframe also contains software to analyze load data and
may contain editing and report preparation software.




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                                        Distribution Efficiency and Demand Side Management (DSM)
                                 Distribution Reform, Upgrades and Management (DRUM) Training Program




Conclusion:

The load research function is increasingly relevant in Indian reforming utilities driven by
their need to establish bench marks for estimating T&D losses, commercial losses as
well as preparation of tariff rates, developing load forecasts and implementing load
management. Most importantly, LR could serve as the point of liaison between the
regulator and the utility by bridging the needs for accurate and reliable information data
by the former and enhancing the capability to obtain and analyze field data by the latter.




References


1.         DSM Strategy and Programs in India – The World Bank’s Experience, by S. Padmanaban;
           Presented at the Workshop on Demand Management and Strategies for the Indian Power Sector;
           March 6-7, 1996; Goa, India.

2.         Strategic Approach for DSM in India, by S. Padmanaban; Reconnaisance Report to ASTAE,
           World Bank, March 1994

3.         Opportunities for Improving End-Use Electricity Efficiency in India, by Steven Nadel, et al; Report
           to USAID, Washington; November 1991

4.         Demand Side Management Load Research Component in Orissa, by Metering Engineering Inc.,
           USA; Report to ASTAE, World Bank, June 1995

5.         Feasibility Study: Electric Motors DSM Project in Orissa and Uttar Pradesh, by Innotem Services
           Limited; Report to ASTAE, World Bank; January 1996

6.         Load Research Manual by the Association of Edison Illuminating Companies; 1990




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