Regulator for capping margins on traded electricity

The Central Electricity Regulatory Commission (CERC) has suggested capping the margin on traded electricity at Re 0.02 per kilowatt hour (Kwh).

At present, given the power shortage in the market, it is a sellers market with margins on traded electricity at around Re 0.05 per Kwh, but going as high as Re 0.30 per Kwh in certain cases.

"The CERC has the freedom to fix trading margins, if necessary," said CERC Chairman, AK Basu.

"We have not fixed the margins for one year. Fifteen trading licenses were issued. We monitored the performance of the trading companies and found that margins in individual deals were as high as Rs 0.37 per Kwh," he added.

Prices have been increasing over the last few years because of capacity constraints in the sector. "In the past, seasonal variations ensured that there were some periods of excess supply during the year. However, now there is perpetual shortage," said a CERC official.

The CERC has, therefore, suggested capping the margin at Rs 0.02 paise per Kwh, including all charges except charges for scheduled energy and open access. Charges for open access include only transmission charge, operating charge and application fee.

Power trading companies will however be opposing the move. "A margin of Rs 0.02 per Kwh is feasible only at high volumes. At low volumes, such a margin will not work," said AK Dhar of NTPC Vidyut Vyapar Nigam Ltd.

The CERC has also proposed amendments to the regulations on grant of licences for inter-state trading. The regulator has issued a draft notification and invited public responses by end-September.