Govt will direct CERC to cap term-ahead market on power exchanges: RK Singh

The government will invoke section 107 of the Electricity Act to direct the electricity regulator to lower the ceiling on power prices in the term-ahead market of power exchanges, power minister R K Singh said.

The order will be given second time in a month as the first directive capping the prices of day-ahead market and real term market at Rs 12 per unit from Rs 20 per unit was given on March 26. With the order all segments of power exchanges will be capped.

“We will issue the order tomorrow,” Singh said on Thursday. The country’s electricity demand touched a high of 204-Gw on the day, breaching the previous high of 201 Gw on Wednesday.

Singh said the high electricity demand shows the Indian economy’s quick rebound after two years of Covid. “It is very good news for all of us. Ofcourse it is a challenge for the power, coal and railway ministries,” he said.

The decision to invoke the section, used under extraordinary circumstances, comes amid complaints from states and industry that power companies are profiteering by overcharging for supply through direct negotiations by evading sale on power exchanges since capping. ET on Thursday reported

West Bengal in its communication to the Central Electricity Regulatory Commission (CERC) sought capping of prices on the term-ahead market. The term-ahead contract prices have moved from Rs 5 to Rs 13 per unit since April 2.

However, the industry remained divided on the efficacy of capping as they said it gives power plants an opportunity to negotiate prices in bilateral markets with desperate buyers. “Existence of a free market is important as the discovered price acts as a benchmark,” said an industry executive on condition of anonymity. Another executive said the government should either cap all short-term markets including bilateral transactions or none.

States like West Bengal, Telengana and Andhra Pradesh have said power is not available to them in power exchanges even at Rs 12 per unit as sell bids have fallen by a sharp 70% since April 2, since when the ceiling was introduced, the sources said.

Power exchanges constitute 54% of short-term trade of electricity. Trade on both exchanges in 11 months of FY22 was 100 BUs and the exchanges' contribution in total electricity generation is 7.5%

The power tariff and availability situation is closely being monitored by the CERC and if required, ‘suitable interventions could be taken, ET reported on Thursday.