India Inc shops for electricity on power exchanges

Sterlite Industries, India Cements, Jindal Stainless, Nahar Industries, Vardhman Group and Rajasthan Spinning and Weaving Ltd are among an increasing number of industrial consumers that have begun buying part of their power requirement through deals on the power exchanges.

Despite initial reluctance by most State Electricity Boards (SEBs) to grant open access permission, industrial consumers now account for nearly a third of the 30-39 million units of electricity traded daily on the IEX, the country's largest exchange, from close to zero a year ago.

This fundamental consumer shift is driving up trading volumes on the exchanges, with around 100 industrial customers emerging as active players on the IEX. The industrial buyers basically come under two categories — one, those facing power-cuts during peak hours and hence resorting to purchases on the exchange by paying up to Rs 10-12 aunit, and, two, firms scouting for cheap power during off-peak hours at less than Rs 3 a unit.

According to analysts, the entry of industrial consumers was sparked off mainly in Punjab and Rajasthan, which started using the trading platform because of price advantage during off-peak, night hours during last winter for the night shifts. The trend has been catching on in other States as well. In the past two-three months, southern States, particularly Tamil Nadu and Andhra Pradesh, have announced power-cuts for industrial consumers during peak hours, prompting them to use open access provisions and buy electricity on exchanges such as the IEX. “Now these industries are putting pressure on the distribution utilities to allow them to buy power round-the-clock,” a Government official involved in the exercise said.

Significantly, quotes by these industrial customers are now emerging as the benchmark for merchant power prices on the IEX, which has an over 85 per cent share of the total electricity traded on the country's power exchanges.