With cheap power on tap at bourses, load-shedding utilities face the stick

If power utilities resort to load-shedding even when electricity is available at cheap prices on the power exchanges, the regulator could wield the stick.

State Electricity Regulatory Commissions have been asked to exercise “regulatory oversight” through “load-shedding protocols” amid instances of rampant power cuts by utilities despite prices crashing in the short-term electricity market.

The Central Electricity Regulatory Commission (CERC) is likely to come out with guidelines in this respect, which could be adopted by the State regulators. The proposal was discussed at the Central Advisory Committee meeting of the CERC recently, where members expressed concern on repeated instances of load shedding by utilities despite power being available at rock-bottom prices on the two operational bourses.

A combination of extended monsoons and new merchant capacity coming on stream have led to a crash in the electricity spot market, with availability well in excess of demand, and prices in the day-ahead market on the bourses down to record lows since August.

Improved hydel generation has also added to the availability. Reflecting this, on the Indian Energy Exchange (IEX), the largest electricity bourse, the weighted average market clearing price plummeted from over Rs 4 a unit in August to around Rs 2.5 a unit range in the first week of September.

However, despite cheap power being available on the exchanges, there is no let-up in power cuts for consumers, especially for industrial users during peak hours across States.

Northern and southern States proved to be the most notorious in announcing cuts during August, the latest month for which data on power cuts has been issued by the Central Electricity Authority.

Haryana, Punjab and Uttarakhand imposed cuts ranging from 90 MW to 600 MW on their industrial consumers during the month.

In the South, Andhra Pradesh and Tamil Nadu issued restrictions and cuts on industrial consumers during peak hours, while Kerala and Karnataka had load shedding of 100 MW and 1,600 MW across consumer categories.

In the West, Gujarat allowed industries to run units through the week if they agreed to staggered weekly holidays.

Of the total electricity generated in the country, roughly eight 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 Power Exchange India Ltd) and the UI (unscheduled interchange) mechanism (the grid-frequency linked price-balancing mechanism).