Concept of Capacity Index

The concept of Capacity Index ensures use of storage type hydro generating stations during peak hours and discourages spillage of water in case of run of the river hydro generating stations.

The notional variable charge for the hydro generating station is the average least variable cost of the thermal generating stations in the region. This facilitates full despatch of hydro generating stations in merit order.

Under the current tariff system, actual operation of the plant is necessary to recover a capacity charge, whereas under the previous tariff, availability of capacity was used to determine the capacity charge. This meant that, under the previous system, the capacity charge recovered by a power generating station was tied to the amount of capacity available rather than based on the
actual operation of the plant. As such, even if there was insufficient water to enable a power station to operate at maximum capacity, the power station could still recover a capacity charge commensurate with the amount of energy that it would have been able to generate through operation had there been a sufficient water supply.

With NAPAF being used to determine the capacity charge under the current system, availability of capacity will no longer have the same impact on capacity charge. Instead, actual production will affect the capacity charge.

The Commission has decided to implement the concept of Capacity Index in place of 'Availability'. The basic criteria for Capacity index are :
a) Water spillage must be minimized
b) As far as possible, the peak capAvailability of a hydro station for any period shall be based on the
Capacity Index (CI) declared for the day. It is defined as follows :
Declared Capacity (MW)
Capacity Index = ------------------------------------------------ x 100
Maximum Available Capacity (MW)acity of each plant must be available when most required by the system.

http://cercind.gov.in/2612/operational.pdf