Cost & Cost Concepts

Cost

Cost can be defined as the expenditure (actual or notional) incurred on or attributable to a given thing. It can also be described as the resources that has been sacrificed or must be sacrificed to attain a particular objective. In other words, cost is the amount of resources used for something which must be measured in terms of money.

INSTALLED CAPACITY
installed capacity' or 'IC means 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;

PLANT LOAD FACTOR

Generation in MUS *1000000*100 divided by MW*1000*24*No. of days

OR Generation in Mus*100000/MW*24*No. of days

Plant Availability Factor (PAF)

Plant Availability Factor (PAF)' in relation to a generating station for any period means 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.

Auxiliary Energy Consumption'

Auxiliary Energy Consumption' or 'AUX' in relation to a period in case of a generating station means the quantum of energy consumed by auxiliary equipment of the generating station, and transformer losses within the generating station

Scheduled Generation

Scheduled Generation or SG' at any time or for any period or time-block means schedule of generation in MW or MWh ex-bus, given by the concerned Load Despatch Centre; Load Despatch Centre means National Load Despatch Centre, Regional Load Despatch Centre or State Load Despatch Centre, as the case may be, responsible for coordinating scheduling of the generating station in accordance with the provisions of Grid Code;

Declared Capacity

Declared Capacity or DC' in relation to a generating station means, the capability to deliver ex-bus electricity in MW declared by such generating station in relation to any timeblock 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;

Time-Block

Time-Block means block of 15 minutes, for which specified electrical parameters and quantities are recorded by special energy meter, with first time block starting at 00.00 Hrs;

Gross Calorific Value

Gross Calorific Value or GCV in relation to a thermal generating station means 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;

HEAT RATE

`Gross Station Heat Rate or GHR means the heat energy input in kCal required to generate one kWh of electrical energy at generator terminals of a thermal generating station;

Specific Fuel Consumption

Specific coal consumption Heat rate of coal (Kcal/Kwh) divided by GCV of coal (Kcal/Kg) Calculation of Coal consumption in MT Generation*specific coal consumption (KG/KWH)*1000000/1000

Specific Oil consumption

Specific Oil consumption Heat rate of oil (Kcal/Kwh)*1000 divided by GCV of oil (Kcal/LT) Calculation of oil im KL Generation*Specific oil consumption(ML/Kwh)*1000000/1000/1000

Tariff Structure

Regulated Industry

Returns are regulated (Not Market Driven) Rewards for Efficiency can be earned through savings on normative parameters for operational elements as fixed by Regulator O&M Cost WCM Heat Rate Aux Power Consumption Sp Oil Consumption

Energy Charges Rate

ECR = { (GHR SFC x CVSF) x LPPF / CVPF } x 100 / (100 AUX) GHR = Gross station heat rate, in kCal per kWh. SFC = Specific fuel oil consumption, in ml per kWh. CVSF = Calorific value of secondary fuel, in kCal per ml. LPPF = Weighted average landed price of primary fuel, in Rupees per kg, per litre or per standard cubic metre, as applicable, during the month. CVPF = Gross calorific value of primary fuel as fired, in kCal per kg, per litre or per standard cubic metre, as applicable. AUX = Normative auxiliary energy consumption in percentage.

Unscheduled Interchange (UI) Charges:

Unscheduled Interchange in a time-block for a generating station or a seller means its total actual generation minus its total scheduled generation and for a beneficiary or buyer means its total actual drawal minus its total scheduled drawal. The charges for Unscheduled Interchange for all the time-blocks 1[*] shall be payable for overdrawal by the buyer or the beneficiary and underinjection by the generating station or the seller and receivable for under-drawal by the buyer or the beneficiary and over-injection by the generating station or the seller and shall be worked out on the average frequency of the time-block

Fixed (Capacity) Charges

Depreciation Interest on Loans Interest on Working Capital Return on Investment O&M Cost Secondary Fuel Oil (1 ml)

Fixed charges (contd..)

1.

Depreciation

90 % of the cost of the asset to be recovered considering the life of

Coal stations at 25 years (3.6 %) Gas stations at 15 years (6 %)

The depreciation is charged as per the rates prescribed in the Companies Act and are at an average, 5.28 %

Fixed charges (contd..)

2.

Interest on Loans

As per the normative interest and loan repayment schedule

3.

Interest on Working Capital

As per the norms allowed in tariff for working capital requirements

Fixed charges (contd..)

4.

Return on Investment

At 15.5 % of the equity component 0.5 % extra for timely completion

5.

O&M Cost

As per the normative rates for different types of generating units.

Fixed charges (contd..)

O&M Cost O&M Cost for 2009-10 is allowed as per the normative rates prescribed :

Coal Stations (500 MW) Rs. 13.00 lakh/MW Coal Stations (200 MW) Rs. 18.20 lakh/MW Gas Stations (w/o spares) Rs. 14.80 lakh/MW
to be escalated by 5.72 pa in subsequent years

The norms for taken over stations are different.

6. Cost of 1 ml oil

Others
Incentive Full fixed charges are recovered at 85 % Availability. Pro-rata over/under recovery of fixed charges (incentive/ disincentive) is prescribed at Availability levels above/below 85%.

Others (water cess etc)

FUEL COST

Cost of coal consumption Cost of oil consumption Cost of gas consumption Cost of naphtha consumption

Fuel cost is Variable cost.

O&M COST
EMPLOYEE COST Salaries & wages Overtime Welfare expenses Medical expenses

O&M COST (contd..)

REPAIRS & MAINTENANCE COST 1. Plant & Machinery

A. Preventive Maintenance
The maintenance activities which are carried out based on the condition of the equipment and failure of the same may lead to process / equipment /safety failure such as : - bearing replacement based on condition monitoring data - pump reconditioning due to deterioration in performance - lube oil change based on condition - plant surveys / inspection initiated by performance problem or safety recommendation

O&M COST (contd..)

Routine Maintenance The maintenance activities which are based on a regular time frame (say calendar / time based) and are not condition based, such as: - safety system checks - lube oil level checks - plant inspection at defined intervals - house keeping

O&M COST (contd..)

Overhauling The maintenance activities carried out during the periodic overhaul program Break-down The maintenance activities which are carried out after a system or equipment has failed

O&M COST (contd..)

REPAIRS & MAINTENANCE COST (Contd..) B. Buildings C. Township D. Other Assets Details of repairs & maintenance cost are given in two heads; Material cost Contractors & Others

O&M COST (contd..)

STATION OVERHEADS Power charges Chemicals & stores consumed Water & environment cess Water charges Insurance Security expenses Communication expenses Inland traveling expenses Foreign traveling expenses

O&M COST (contd..)

STATION OVERHEADS (Contd..) Vehicle running expenses Tender expenses Legal & professional consultancy Training expenses Advertisement & publicity Education Rehabilitation & Resettlement expenses Ash utilization expenses Other administrative overheads

CC Expenses

Depreciation Interest & Finance Charges Interest on Fixed Capital Interest on working Capital Finance Charges Rebate Prior Period Expenses Other Expenses/Provisions

NR - O&M Expenses Vs CERC Recovery 2007-08

Station MOU Target Station O&M Cost CC Exp. Total O&M CERC Recovery

Rs./Lakh Excess/ Shortfall

Singrauli Rihand FGUTPS Tanda

22869 19385 12514 8523

24531 20563 15225 9622

3655 5182 3228 1485

28186 25745 18453 11107

22220 21040 11916 8265

-5966 -4705 -6537 -2842

Total

63291

69941

13550

83491

63441

-20050

O&M expenses include expenses transferred to fuel.

WR - O&M Expenses Vs CERC Recovery 2007-08

Station MOU Target Station O&M Cost CC Exp. Total O&M CERC Recovery

Rs./Lakh Excess/ Shortfall

Korba Vindhyachal Kawas Jhanor Gandhar Sipat Total

23292 24281 4871 5055 2823 60322

24940 26002 5393 5175

3418 7464 4233 2432

28358 33466 9626 7607

22800 33368 3839 5765

-5558 -98 -5787 -1842

61510

17547

79057

65772

-13285

O&M expenses include expenses transferred to fuel.

SR - O&M Expenses Vs CERC Recovery 2007-08

Station MOU Target Station O&M Cost CC Exp. Total O&M CERC Recovery

Rs./Lakh Excess/ Shortfall

Ramagundam Simhadri Kayamkulam

24473 8985 3045

26444 10301 3017

6373 2357 2669

32817 12658 5686

28060 10520 3154

-4757 -2138 -2532

Total

36503

39762

11399

51161

41734

-9427

O&M expenses include expenses transferred to fuel.

ER - O&M Expenses Vs CERC Recovery 2007-08

Station MOU Target Station O&M Cost CC Exp. Total O&M CERC Recovery

Rs./Lakh Excess/ Shortfall

Farakka Kahalgaon TSTPS TTPS

21637 16754 17998 11391

24367 16672 20875 13483

4033 2213 5651 929

28400 18885 26526 14412

17540 9828 31560 9728

-10860 -9057 5034 -4684

Total

67780

75397

12826

88223

68656

-19567

O&M expenses include expenses transferred to fuel.

NCR - O&M Expenses Vs CERC Recovery 2007-08

Station MOU Target Station O&M Cost CC Exp. Total O&M CERC Recovery

Rs./Lakh Excess/ Shortfall

Dadri (Coal+Gas) BTPS Anta Auraiya Faridabad Total

16447 18274 3914 4314 3321 46270

18765 20105 3763 4418 3360 50411

6487 2639 1417 2120 1461 14124

25252 22744 5180 6538 4821 64535

14682 14275 2453 3881 3785 39076

-10570 -8469 -2727 -2657 -1036 -25459

O&M expenses include expenses transferred to fuel.

NTPC - O&M Expenses Vs CERC Recovery 2007-08

Region MOU Target Station O&M Cost CC Exp. Total O&M CERC Recovery

Rs./Lakh Excess/ Shortfall

NR WR SR ER NCR Total

63291 60322 36503 67780 46270

69941 61510 39762 75397 50411

13550 17547 11399 12826 14124

83491 79057 51161 88223 64535

63441 65772 41734 68656 39076

-20050 -13285 -9427 -19567 -25459 -87788

274166 297021

69446 366467 278679

O&M expenses include expenses transferred to fuel.

O&M Cost under recovery

Under-recovery of O&M cost, due to :

Wage revision provisions

Higher maintenance costs General inflation One time expenses

Income Vs Expenditure
Income
Variable Charges/FPA Fixed Charges Depreciation Interest on Loans Intt on Working Capital O&M Cost ROE Incentive above 85 % availability UI when grid frequency below 50 Hz

Expenditure
Fuel Cost
Depreciation Interest on Loans Rebate, Finance Charges O&M Cost disincentive below 85 % availability When grid frequency above 50 Hz

O&M Cost Budgeting and Monitoring

O&M Cost Budgeting

The budgeting exercise starts in January every year for the next two years (i.e. January 2011 for RE 2011-12 and BE 2012-13) and is completed by March. Budgets are to be prepared by all stations under commercial operation. The Budget proposals are compiled at the stations by each individual department. MTP & O&E are responsible for all O&M while the responsibility of coordinating the entire budget exercise rests with Finance.

O&M Cost Budgeting

Objectives
Specific targets in terms of physical and financial activities Coordination in planning Basis for forecasting estimates, fund requirements Monitoring

The initial proposals, after approval of the Budget Committee at the stations, are forwarded to CC through Regional EDs.

O&M Cost Budgeting

The proposals are reviewed at CC and are communicated to the stations after approval. The final budget are phased into monthly targets.

O&M Cost Monitoring

The actual information is tabulated every month against the budgeted targets. Any significant variation, especially in O&M costs, is analysed and remedial action, if any, is taken. The quarterly reports are reviewed by senior officials and are also presented to CMC.
Cost Sheet

Cost Accounting and Audit in NTPC

Overview

Costing System in NTPC Cost Accounting & Audit Cost Audit Branch, Ministry of Company Affairs Cost Accounting Record Rules Cost Audit Report Rules Cost Centre Codes in NTPC

Costing System in NTPC

A costing system has been designed for use in NTPC stations. The objective of the system are :

To ascertain unit wise and station wise cost of the power generated To compare costs between different units of the same and different stations To analyse variances and to take remedial action wherever required.

COST CENTRE CODES

A system of cost centre codes is implemented in conjunction with the account codes and the costing system is integrated with the SAP ERP. The prescribed reports are thus generated using the financial data. Today the costing reports are an integrated part of the SAP ERP system.

COST CENTRE CODES

1004 1005 1006 1007 1010 1011 1012 1013 1014 1015 Singrauli Rihand Unchahar Tanda Badarpur Dadri-Coal Auraiya Anta Dadri-Gas Faridabad

1017 1018 1019 1020 1021 1024 1025 1026 1027 1033 1034 1035

Korba Vindhyachal Sipat Kawas Gandhar Farakka Kahalgaon Talcher Super (TSTPS) TTPS (taken over) Ramagundam Kayamkulam Simhadri

COST CENTRE CODES

ist to 4th digit Business Area 5th digit 6th digit 7th & 8th digit System/sub -system 10041101General 10041102BMD

Stage

Unit

1004-SSTPS 10041-Stage I 10041110042-stage-II stage-I Unit-I