The other critical aspect of the e-auction tariff is that it is quoted by the IPPs at the delivery point of the respective state periphery of the procurer and hence includes the costs that the IPP will have to bear including intra-state open access charges, transmission charges, point of connection injection charges and losses. Therefore, the net realisation to the IPP will be lower, which highlights the fact that the power market continues to be a procurers market and low net realisation for the IPPs can impact their cash flows. In fact leveraged IPP's may need to look for refinancing of debt.
The price discovery for power through the reverse e-auction has been quite favorable for the procurers, which may lead to higher demand in the reverse e-auctions in the future. Ind-Ra believes this will also impact the volumes of power which are sold through the power exchanges.
Ind-Ra notes currently the reverse e-auction is applicable on short-term power purchases (period of more than one day but less than one year) but consequently, due to the success of this method of bidding, the government may introduce the e-auction mechanism even for the purchase of medium to long term power.
Ind-Ra notes that the power tariffs in the e-auction compares quite favorably with the all India average price of INR2.91/kwh in April 2016 on the Indian Energy Exchange, with the bilateral all India weighted average price of INR3.90/kwh in March 2016 and with the average power purchase cost for the distribution utilities (discoms) in the respective states.
Till date four utilities have procured power through the reverse e-auction route, namely Kerala State Electricity Board (KSEBL), Torrent Power (TPL), Uttarakhand Power Corporation (UPCL) and Bihar State Power Holding Company (BSPHCL) at an average tariff of 3.23/kwh, INR3.02/kwh, INR2.80/kwh and INR3.30/kwh respectively. TPL emerged as the largest bidder in terms of quantity since it procured power over the longest time period, between May to October 2016. The below table provides a comparative analysis of the average prices along with the area specific prices on the exchanges.
In the current round of auctions, the procurers had the option of either requisitioning round the clock power (RTC) or power under different time slots. Most of the states needed different quantities under different time slots, while UPCL had two bids for supply of RTC power at tariffs of INR2.69/kwh in August 2016 and INR2.66/kwh in September 2016 which again compares quite favorably with the weighted average RTC price of INR3.97/kwh during March 2016. Additionally, under the short term bidding guidelines for the reverse e-auction, the tariff quoted is a single part tariff unlike a two part tariff consisting of fixed and variable costs. Ind-Ra has been highlighting that given the large fixed charges that distribution companies end up paying on the basis of availability and their weak financial health, they had been wary of singing a two part tariffs and were keen to sign a single part tariff.
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