SYSTEM BLOCK DIAGRAM Authority Creates Policy PENRA
Regulator Implements Policy Regulates Sector PERC Creates Secondary Regulation (Bylaws) Monitors performance
Transmission Company Single Buyer Owner of HV substations PETL Sells to DISCOS ??
Distribution Companies Operate 33/11/0.4kV system (wires) DISCO 1 DISCO 2 DISCO 3 DISCO 4 DISCO 5 Buys Energy from PETL Sells Energy to Customers
Municipalities
1/30/2019 Tariff Regulation 1 ENERGY FLOWS Creates Secondary Regulation
Generators IPP Generate Power and Energy (MW and GWh) IEC Sell Energy to PETL 161 kV 33 kV Transmit Energy and Power to Discos
Transmission Company Single Buyer PETL Owner of HV substations? Sells to DISCOS ? NOW FUTURE
Distribution Companies Operate 33/11/0.4kV system (wires) DISCO 1 DISCO 2 DISCO 3 DISCO 4 DISCO 5 Buy Energy from PETL Sell Energy to Customers
mixed voltages Customers Customers Customers Customers Customers Customers MV and LV
MUNICIPALITIES
1/30/2019 Tariff Regulation 2 SYSTEM COSTS FLOWS – PETL SINGLE BUYER Creates Secondary Regulation
Generators IPP Generate Power and Energy (MW and GWh) IEC Sell Energy to PETL 161 kV 33 kV Transmit Energy and Power to Discos
Transmission Company Single Buyer Owner of HV substations PETL Sells to DISCOS ?? FUTURE NOW
Distribution Companies Operate 33/11/0.4kV system (wires) DISCO 1 DISCO 2 DISCO 3 DISCO 4 DISCO 5 Buy Energy from PETL Sell Energy to Customers
mixed voltages Customers Customers Customers Customers Customers Customers MV and LV
1/30/2019 Tariff Regulation 3 SYSTEM REVENUE FLOWS PETL SINGLE BUYER
Generators IPP Generate Power and Energy (MW and GWh) IEC Sell Energy to PETL 161 kV 33 kV Transmit Energy and Power to Discos
Transmission Company Collects revenues from Discos PETL Pays IEC NOW FUTURE
Distribution Companies Collect revenues from Customers DISCO 1 DISCO 2 DISCO 3 DISCO 4 DISCO 5 Pays PETL
mixed voltages Customers Customers Customers Customers Customers Customers Pay for Power and Energy
1/30/2019 Tariff Regulation 4 ENRGY SALES and LOSSES
Generator
METERED 11 kV MEASURED or ESTIMATED CANNOT BE MEASURED DERIVED 100% 161 kV sales 2% 98% 161 kV 161 kV losses 3% 95%
33 kV sales 4% 91% 33 kV 33 kV losses 3% 88%
11 kV sales 2% 86% 11 kV 11 kV losses 2% 84%
0.4 kV sales 65% 19% 0.4 kV 0.4 kV technical losses 10% 9% 0.4 kV non-technical losses 9%
1/30/2019 Tariff Regulation 5 SYSTEM BLOCK DIAGRAM Cost Distribution Sales and losses Energy MWh cents/kWh $ Energy purchased 600,000 Generator purchase price 37.0 Generation 60.0% Cost 222,000,000
11 kV
HV Transmission Transmission 1.0% 161 kV sales 2.0% PETL cost 3,700,000 PETL cost 161 kV 161 kV losses 3.0% Cumulative cost 225,700,000 Energy less sales+losses 570,000 Energy price 39.6
33 kV sales 2.0% 33 kV 33 kV losses 3.0% MV costs 5.0% MV Transmission cost 18,500,000 Cumulative cost 244,200,000 Energy less sales+losses 510,000 Energy price 47.9 11 kV sales 2.0% 11 kV 11 kV losses 3.0%
0.4 kV sales 70.0% Distribution cost 125,800,000 LV Distribution 15.0% 0.4 kV 0.4 kV technical losses 7.0% Cumulative cost 370,000,000 Customer service 19.0% calc 0.4 kV non-technical losses 8.0% Energy less losses 433,500 Energy cost 56.3 Total 100.0% 100.0% 1/30/2019 Tariff Regulation 6 SYSTEM TARIFFS
From 1 – not exceeding 160 kilowatt hour a month 0.4580 ILS per kilowatt hour A Time of Use Tariff is introduced for industrial consumers supplied at low voltage 0.4kV consuming less than 60 MWh/year. There are three time blocks per day ( A, B and C) and different rates for summer From 161 – not exceeding 250 kilowatt hour a month 0.4938 ILS per kilowatt hour and winter. From 251 – not exceeding 400 kilowatt hour a month 0.5695 ILS per kilowatt hour From 401 – not exceeding 600 kilowatt hour a month 0.6089 ILS per kilowatt hour Summer Low Voltage Tariff A 0-7; 21-24 0.3948 Low Voltage Tariff B 7-10;17-21 0.5617 Over 600 kilowatt hour a month 0.6731 ILS per kilowatt hour Low Voltage Tariff C 10-17 1.2022 Low Voltage Tariff A 0-6; 22-24 0.3800 Low Voltage Tariff B 20-22 0.4564 The Jericho and Jordan valley tariff is different and has just two blocks plus a flat rate for prepaid Low Voltage Tariff C 6-20 0.5450 meters. Winter Low Voltage Tariff A 0-6; 8-16; 22-24 0.4210 Low Voltage Tariff B 6-8 0.6604 From 1 – not exceeding 500 kilowatt hour a month 0.4484 ILS per kilowatt hour Low Voltage Tariff C 16-22 1.0792 Daily fixed fee 6.183 Above are for Sunday- Thursday, There are more relaxed rates Friday, Saturday Over 500 kilowatt hour a month 0.4883 ILS per kilowatt hour and Holiday. – see attachment Prepaid meter consumers (Flat Rate Tariff) 0.4734 ILS per kilowatt hour
The Time of Use tariff applicable to MV consumers (33, 11 and 6.6kV) is as follows. Commercial tariff applicable to hotels, public buildings, commercial enterprises, etc. either flat rate or Summer Low Voltage Tariff A As above 0.3059 prepaid as follows. Low Voltage Tariff B 0.4551 Low Voltage Tariff C 1.0433 (Flat Rate Tariff) Metered 0.6248 ILS per kilowatt hour Low Voltage Tariff A 0.2970 (Flat Rate Tariff) Prepaid 0.5963 ILS per kilowatt hour Low Voltage Tariff B 0.3650 Low Voltage Tariff C 0.4476 Winter Low Voltage Tariff A 0.3342 Industrial and MV Consumers have the following tariffs. Low Voltage Tariff B 0.5616 Low Voltage Tariff C 0.9431 Daily fixed fee 10.068 (Flat Rate Tariff) Up to 60 MWh/month Industrial 0.4kV 0.5088 ILS per kilowatt hour (Flat Rate Tariff) 6.6, 11, and 33kV (no TOU) 0.4339 ILS per kilowatt hour The tariff allows a penalty to be applied to consumers with adverse power factors below 0.92. (Flat Rate Tariff) Stone and Marble factories 0.4kV 0.5807 ILS per kilowatt hour Consumer’s Power Additional cost incurred to the monthly bill Flat Rate Tariff Water pumping 0.4kV 0.4825 ILS per kilowatt hour Factor 0.92 or More Nothing Flat Rate Tariff Agriculture 0.4kV 0.4616 ILS per kilowatt hour Less than 0.92 to 0.70 0.77% of the bill value per each 0.01 of the power factor under 0.92 Flat Rate Tariff Street lighting 0.4kV 0.4721 ILS per kilowatt hour Less than 0.70 to 0.60 0.95% of the bill value per each 0.01 of the power factor under 0.92 Less than 0.60 to 0.50 1.20% of the bill value per each 0.01 of the power factor under 0.92 Flat Rate Tariff Temporary services 0.4kV 0.7909 ILS per kilowatt hour Less than 0.50 1.50% of the bill value per each 0.01 of the power factor under 0.92
1/30/2019 Tariff Regulation 7 TARIFF METHODOLOGY PERC Tariff Methodology PERC uses a “cost plus tariff” methodology. It is based on the purchase price of electricity from IEC. Added to the cost of electricity purchase are the costs of distributing the electricity to the customers (the wires business) and the costs of serving the customers (the supply business). The Regulatory Asset Base (RAB) is developed along traditional lines by calculating the Net Fixed Assets, adding Work in Progress, Working Capital needs less Government Contributions. The Return on Investments (ROI) is calculated from the Regulated Asset Base and the Weighted Average Cost of Capital (WACC). WACC is determined by Government and is not calculated by PERC. It is currently set at 8%. ROI = RAB * WACC Next, the regulated Revenue is determined; Regulated Revenue = Cost of Purchases + OPEX + Depreciation + ROI + Licence fee - Customer contributions - Government subsidies
Depreciation is straight line based on asset life of 24 years.
1/30/2019 Tariff Regulation 8 KEY PERFORMANCE INDICATORS
• Distribution Operation Efficiency • Technical and Commercial Losses in Distribution System • Energy Losses = Energy purchased – Energy Delivered • Technical and Commercial Losses • Substation Metering • Customer metering collection. • Billing Effectiveness • Collection Effectiveness
1/30/2019 Tariff Regulation 9 SYSTEM BLOCK DIAGRAM
1/30/2019 Tariff Regulation 10 ENERGY CONSUMPTION BY CATEGORY
1/30/2019 Tariff Regulation 11 SYSTEM BLOCK DIAGRAM
1/30/2019 Tariff Regulation 12 DISCUSSION of ISSUES
Good Base Data for Monitoring and Regulation PERC is already collecting data for monitoring performance and tariff design. Areas where better data may be obtained are; – Load forecasting – Cost of service study – Customer load profiles (load shapes) – Asset valuation and ageing of assets
1/30/2019 Tariff Regulation 13 LOAD FORECAST • Time horizon of five years and with additional projection to a ten-year horizon. • Load forecast for each DISCO consolidated centrally by PERC. • Add in, projections for the municipalities and villages (LGU) • Econometric method – historic economic data, – historic load data, – GDP growth projection – Population growth projections, – Elasticity of demand – Energy Intensity. • The load forecast should be separated by voltage level and consumer category. • Used for monitoring CAPEX • Essential input into any cost of service study.
1/30/2019 Tariff Regulation 14 COST of SERVICE • New or Update of existing study • Separate the costs by voltage (33kV, 11 kV 6.6 kV and 0.4 kV) and customer categories • In the West Bank the variable cost is the energy purchased from IEC most other costs are fixed • IEC introducing fixed and variable charges (MW and MWh) • Keep fixed and variable costs separated throughout the study • Treat variable costs as Energy costs (MWh) and the fixed costs as Capacity or Power charges (MW). • MW costs needed to determine responsibility for coincident peak • Even for customers served at LV the separation of fixed and variable costs (Capacity and Energy) needs to be maintained • CoS needs seasonal separation for To U tariff • To prepare when delivery and supply may be separated, customer charges should also be separated out. • The separation of DISCO costs is to the “wires” business and the “supply” business.
1/30/2019 Tariff Regulation 15 LOAD PROFILES (SHAPES) • Key to the understanding the nature of the system load is the load profile or load shape of each consumer class. – The shape is determined by customer use. – A steady pumping load will have a flat profile – Residential load will have a morning and evening peak. – Industrial loads steady during working hours and low when shut down. • The peak load determines the generating, transmission and distribution requirements of the system. • The load shapes allow the determination of the coincident peak. – Each consumer category’s contribution to the coincident peak determines their capacity charge. • The load profiles may be determined by the DISCOs. – This can be from internal data as when a To U tariff is already in place – By analysis and measurement of consumption in real time (data loggers) or on feeders dedicated to each type of customer. • The load shapes are an essential input into the cost of service study and tariff design.
1/30/2019 Tariff Regulation 16 ASSET VALUATION – AGEING OF ASSETS • Net Fixed Assets, – Book value of the Asset less depreciation to take into account the reduction in asset value and its reduced life. – It is understood that JDECO have estimated the asset base recently – NEDCO is producing an updated valuation at this time. • Important that the asset base truly reflects the value of the asset and the remaining life of the asset. – In some instances, the value of the asset may need to be updated to reflect its condition and remaining life. – Consider the current cost of asset replacement rather than the historic cost. – Generally, it is the replacement cost that better defines the cost that is to be included in the tariff. • If a tariff revaluation study is to be undertaken – Conducted by engineers familiar with the operation and maintenance of distribution systems, not by accountants. – Revaluation of assets is not a desk study, it requires a true understanding of distribution network equipment – Detailed knowledge of actual replacement costs.
1/30/2019 Tariff Regulation 17 TARIFF DESIGN and METHODOLOGY The key elements of tariff design as indicated above include – fair to both the customer and to the power company; – reflects the true value of the electricity and the costs of delivery; – supportive of energy conservation and efficiency; – avoids cross subsidies from one consumer group to another – to the extent possible. – simplicity so that it is understood by the customer; Elements that help to meet the above requirements. – The clear separation of fixed costs and variable costs – Allocation of the costs correctly to the responsible consumer class – Retention of MW and MWh in tariff development – Single versus multi-year tariff and incentive regulation – Tariff Precision and accuracy – Number of tariff categories
1/30/2019 Tariff Regulation 18 SEPARATION of FIXED and VARIABLE COSTS • Variable cost is the cost of fuel and consumables for energy generation, transmission and distribution • Infrastructure costs of lines, cables, transformers and metering are fixed. • In the Palestinian system the variable cost is the cost of energy purchase from IEC. • Traditionally the only cost from IEC. This should be allocated to the Energy (MWh) charge. • Recently a capacity charge is being introduced and is expected to increase over time. – Tariff design needs to separate capacity (MW) and energy (MWh) charges • Almost all DISCOs costs are fixed. – Allocate DISCO costs to capacity (MW) unless a very good case is made for some items to be made variable.
1/30/2019 Tariff Regulation 19 ALLOCATION of COSTS • Correct allocation needed to accurately reflect the true cost of serving each consumer category. • Cost allocation is separated by energy and capacity charges comes from the cost of service study. • Include allocation by voltage level and for both capacity and energy – Based on contribution to the system coincident peak to determine the capacity charge. • Allocation of losses is particularly important and once down at the 0.4kV level is difficult to allocate. – Technical distribution losses may be estimated and supported by distribution load flow analysis. – Some insight into determining the source of commercial losses may be gathered from billing data and on surveys of 11kV lines serving different classes of customer. – Any energy unaccounted for by sales and technical losses is allocated to the commercial loss. – Unless it can be shown that a specific consumer class is responsible for the loss it is allocated proportionally to all 0.4 kV consumers.
1/30/2019 Tariff Regulation 20 RETENTION OF CAPACITY (MW) and ENERGY (MWh) in the DETERMINATION of TARIFF
• To ensure that costs are correctly allocated it is important that capacity and energy charges are kept separated throughout the derivation of the retail tariff.
• Only the customer service charges can be left out of the capacity and energy allocation.
• The customer service charge is usually allocated at the same level to each consumer class served at the same voltage level and using a single part meter.
1/30/2019 Tariff Regulation 21 SINGLE versus MULTI-YEAR TARIFF • PERC currently uses a single year tariff which is adjusted annually. • Consideration may be given to the introduction of multi-year tariffs. – With the single year tariff, the regulator sets the Net Regulated Revenue for one year. – In a multi- year tariff regime, the tariff is set for a period, often 5 years. (MAR) • In using multi-year tariffs, we move to a form of incentive regulation. – The regulator sets up parameters for the DISCO to attain. – Targets typically include; loss reduction targets, improving billing performance, improving collection performance or introducing operation and maintenance efficiencies. – The annual targets for five years are negotiated and agreed between the regulator and the DISCO. – DISCO might be set to reduce current loss levels of 23% by 1% per year to reach 18% by year 5; – May be set to reduce O&M costs by 2% per year
1/30/2019 Tariff Regulation 22 SUGGESTIONS for GOING FORWARD (1)
The following would improve PERC’s ability to monitor performance better and provide better inputs for designing the final retail tariffs. • System Load Forecast – A system load forecast needs to be developed. – The start would be with each DISCO. – The five DISCO forecasts should be consolidated and then the LGU data forecasts added. – As a first pass an econometric method would be used, unless the DISCOs have better data. • Cost of Service Study – Carry out CoS for a better understanding of the costs imposed on the system at each voltage and by each consumer category. – The study could be a new one, or, if a study already exists, one that could be updated.
1/30/2019 Tariff Regulation 23 SUGGESTIONS for GOING FORWARD (2) • Customer Load Profiles – DISCOs should start producing customer load profiles (load shapes) as an input to the Cost of Service study. – The purpose of the load profile is to more accurately assess the contribution of each consumer category to the system coincident peak. • Asset Valuations – Asset valuations are in the process of being updated by the DISCOs . – Consideration should be given to whether the asset value used in the calculation of the Regulated Revenue is correct. – The asset value should represent the true value of the asset that has been depreciated • consider its age and condition • Does depreciation allows for asset replacement at current prices.
1/30/2019 Tariff Regulation 24 SUGGESTIONS for GOING FORWARD (3) Separation of Fixed and Variable Costs – Separation of fixed and variable costs would assist in developing the tariff. – Fixed costs treated as capacity or power costs and only variable costs as energy costs. – In the West Bank system, almost all costs are fixed – DISCO cannot change the cost in the short term. – Only in the longer term can fixed costs be lowered through efficiency gains. Allocation of Costs – For all consumers allocation by voltage and capacity and energy – Losses are also allocated by voltage – Loss allocation at 0.4 kV
1/30/2019 Tariff Regulation 25
SUGGESTIONS for GOING FORWARD (4) Capacity(MW) and Energy (MWh) As well as treating the fixed and variable costs separately as addressed above – Capacity and Energy values should also be collected and used for all consumer categories. – Used along with costs for determining the retail tariff. – Final retail tariff at LV is retained as an energy only tariff with the capacity costs converted to energy costs. Single versus Two-part Tariff – In a two- part tariff, capacity and energy are priced separately. – IEC moving to two-part tariff where capacity (MW) and Energy (MWh) are priced separately. – Even if not implemented immediately, designing the tariff methodology to deal with this eventually is recommended.
1/30/2019 Tariff Regulation 26 SIMPLIFIED FLOW DIAGRAM
CAPEX LOAD FORECAST OPEX
IMPORTS IPP PETL DISCOs LGU and IPP
COST of SERVICE LOAD SHAPES
GOVERNMENT RETAIL TARIFF DESIGN POLICY
1/30/2019 Tariff Regulation 27
1/30/2019 Tariff Regulation 28 The end
Thank You !
1/30/2019 Tariff Regulation 29