The document discusses the philosophy of Point of Connection (POC) transmission charges, focusing on how these charges depend on methods of measuring utilization, specifically average (AP) and marginal (MP) utilization of transmission assets. It outlines the efficient pricing model for electricity transmission, the theories behind the MP and AP methods, and introduces a hybrid method that is deemed suitable for India. The document also notes the transition from 50% to 100% POC sharing as proposed in the CERC's draft amendment.

1. PhilosoPhy of PoC
Transmission
Charge
Amitava Nag

2. How transmission charge depends
on measure of utilization?
Pricing basically depends on the
method of measuring the
utilization as under:
1. Average utilization of the
transmission assets
2. Marginal utilization of the
transmission assets

3. What is efficient pricing?
Pricing of a commodity or service
is considered as efficient when
marginal cost of utilization of the
underlying resources that are
used is reflected.

4. How efficient pricing works for
Transmission of Electricity?
It tries to identify how much power
that flows through each of the
lines in the system is due to the
existence of a certain network
user and charge it according to
the measure of utilization.

5. What are MP & AP methods?
• Utilization of the Transmission Network is
generally determined in terms of either
average or marginal utilization of the
Transmission Assets.
• Depending upon the method of capturing
the utilization, it is called MP (marginal
participation) or AP (average participation)
method.

6. What is the basic theory behind
MP method?
Kirchhoff’s current law is the basic theory
behind Marginal Participation method

7. What is the basic behind
AP method?
“proportionate tracing method” proposed
by Kirschen in 1996 is the basic behind
Average Participation method.

8. What is done in MP method?
• It analyzes how the flows in the grid are
modified when minor changes are introduced
in the production or consumption of any agent.
• Total participation for each agent are
calculated as a product of its net injection by
its marginal participation.
• Cost of each line is allocated pro-rata to the
agents according to total participation in the
line.

9. Which are the countries follow
MP method?
UK, Norway, Brazil, Columbia use
MP method with modification to
their need.

10. What is Hybrid method?
1 MW injection or withdrawal in a bus is
compensated by other buses called
slack buses. These slack buses are
selected by AP method by constructing
physical paths for generator or demand
node. Then burden of transmission
charges or losses on each node is
computed.

11. What is PoC?
• Recovery of the cost of line from an
entity in proportion to the extend of
usage.
• Aggregation of entity’s usage cost
and division by MWs injected or
consumed and time duration leads to
Point of Connection tariff (PoC).

12. Why Hybrid method accepted as
suitable for India?
The criticism of the MP method
that the results are dependent on
the choice of the slack bus is
removed in hybrid method by
selecting slack buses by AP
method.

13. When does 100% PoC sharing
shall start?
Presently 50% sharing is done by PoC
method and rest 50% on postage stamp
method which accepted as a transitional
methodology. Hon’ble CERC has drafted
3rd amendment of PoC method in which
100% PoC application is proposed.