The Central Electricity Regulatory Commission (CERC) has proposed steps to restrict the price of electricity traded in the short-term market. The trades are primarily carried through the energy exchange.
The price of short-term power, traded for a time-frame of less than a year, has been between zero and Rs 9 per kilowatt hour in the last few months. This range, the regulator feels, is too wide and is a burden on power-deficit states that buy large units of electricity.
“Power-deficit states are suffering on account of the high cost of power bought through the short-term market. This is leading to a huge cost burden on generation utilities as well as consumers of power,” said Pramod Deo, chairman of the regulatory board.
The regulator had earlier this year published an internal paper on steps to control the steep rise in prices of electricity in the short-term market. In the paper, the commission’s staff had proposed a price cap of Rs 5 and Rs 6 per unit of electricity bought and sold, respectively, in the short term (less than one year).
The proposals were opposed by a majority of stakeholders, including power generation utilities, on various grounds, including the commission’s legal authority to introduce such a cap.
The regulato said in a statement today that it was empowered to fix price caps for inter-state sales depending upon “overall circumstances and all relevant factors”. The statement says there is a need to address “crucial aspects such as the review of unscheduled interchange mechanism and the absence of a mechanism to regulate the price of sale of free power by state governments”.
The central electricity regulator has also asked the Ministry of Power to devise a mechanism to regulate the price of free power from hydro power stations.
Deo said the price cap of Rs 5 and Rs 6 had not been introduced yet because the regulator’s powers in this regard were limited to a portion of power traded, the rest being tied up by states which sell free power from sources like hydro. “They are not covered under any definition of licensee or generator,” he said.
The power traded in the short term market is bought and sold in day-ahead contracts. About 20 per cent of electricity produced in India (666 billion units) is traded like this every year. The rest is tied up through long-term power purchase agreements of up to 25 years and more.
