The power regulator is likely to propose a Rs 5 a unit (kilowatt-hour) cap on the sale of power from coal-fired plants in the short-term market.The move, coming in the wake of pressure from the Planning Commission for a clampdown on tariffs, is based on the rationale that there is “sufficient margin” in the proposed tariff cap for firms to make profits in the short-term market, which includes bilateral contracts and deals through traders spanning less than three months, as well as transactions taking place on the power exchanges.
Under conditions of shortage of supply of electricity, the regulator — the Central Electricity Regulatory Commission or CERC — has been empowered under Clause (a) (1) of Section 62 of the Electricity Act 2003 to fix lower and upper ceilings of tariff for sale and purchase of electricity. The CERC had last September invoked its powers under the legal provision and notified a price ceiling of Rs 8 a unit applicable to power exchanges as well as bilateral markets to rein in what it calls runaway prices. The cap on prices was applicable for 45 days.
The average tariffs in the short-term market currently are, however, well within the Rs 5-6 a unit range, way below the Rs 19 a unit levels recorded during the second half of last calendar year. Industry players, including executives with power trading firms and one of the exchanges termed the proposal, if it comes through, an instance of “over-regulation as no instance of market abuse or market domination has come to light to warrant intervention by the Commission.”Also, imposing a price cap would send a contradictory signal to the investors, which might affect fresh investments in the sector, they said.
Two power exchanges operate in the country — the Indian Energy Exchange (IEX) and the Power Exchange India Ltd (PXIL). Of the total electricity generated, roughly 8 per cent is transacted in the short-term market.
Of this, around half is through bilateral deals (via traders and directly between distribution companies), while the remaining is through the power exchanges (IEX and PXIL) and the UI mechanism (the grid-frequency linked price-balancing mechanism).In March, for which latest data is available, the weighted average price of electricity transacted through traders was Rs 4.94 a kWh while the weighted average price of electricity transacted on the Power Exchanges was Rs 5.58 on the IEX and Rs 6.47 on PXIL
Power play
Tariff cap may be Rs 5/unit
Clampdown on power sales from coal-fired projects
Pressure from Planning Commission behind the move
Merchant power plants, private projects could be affected
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