KOLKATA: Power exchanges will have to sell power at low prices since state distribution companies will not be able to purchase high-priced power, Central Electricity Regulatory Commission (CERC) chairman Pramod Deo said on Monday.
Deo, at an interactive session organised by the Merchants’ Chamber of Commerce, said power has been traded at prices between R2.96 and R4.00 per kilowatt hour not due to low demands but because the state distribution companies would not be able to buy power if it was sold at higher margins.
Trading rates were supposed to be volatile given the condition of fuel supply and the increase in generation cost. “But exchanges were forced to trade at lower margins to keep itself afloat,” Deo said, adding that long-term contracts would help the exchanges trade in larger volume.
In March 2012, the power exchanges reported trading 1,647.71 million units for the month. According to a CERC report, 83% of the volume contracted was at Rs 4 per kilowatt hour and a total of 107 contracts were made by five traders, 74 of the contracts were for less than a week. There were no contracts signed for above three months.
Deo said if contracts were signed for above three months, there would be more stability in the business of exchanges. But the forward market commission has already demanded that for long-term contracts, traders would require to take its approval. However, CERC, as the monitoring body of the power exchanges, has reservations and Deo on Monday remained non-committal on the issue.
He said good financial health of state electricity distribution companies would be a booster to the growth of merchant power market and for that the state electricity regulatory commissions (SERCs), in line with the appellate tribunal’s pronouncement, should take suo-moto initiatives to revise power tariffs.
Deo said as many as 10 states did not revise power tariff for a long time, and Tamil Nadu revised its tariff and made an increase by an average 37% after 10 years. “A state like Uttar Pradesh is yet to revise its tariff,” Deo added.
He stressed the need for separate feeders for supplying power to the agricultural sector saying that this would gradually move towards running metered pumps for irrigation and give a clearer picture of the consumer mix, consumption pattern, areas of peak and off-peak demand as well as the actual transmission and distribution losses.
Gujarat has already made separate feeders for the agricultural sector and states like Maharashtra, Andhra Pradesh, Karnataka, Rajasthan and Madhya Pradesh are moving towards it.