NEW DELHI: Preparations for the upcoming elections have set the spot power market on fire, with state power distribution companies offering to pay more than the asking price just to ensure consistent supply.
Discoms of states like Maharashtra, West Bengal, Bihar and Tamil Nadu are placing desperate bids to buy electricity at Rs 20 per unit, 40% more than the asking price.
Aggressive bids being placed by discoms in western and southern region to avoid load shedding have led prices to peak on the exchange at a 10-year high of Rs 18 per unit, with the average hovering at Rs 6-8 per unit.
Buy bids aggregating 10,000 MW at Rs 20 per unit, the maximum price that can be quoted at the exchange as per power regulator’s norms, are being submitted by many states at various time blocks in a day, sources said.
“States have been mandated to make electricity available round the clock, even at the highest cost in the run up to the elections,” an official said.
However, high demand has not brought any relief to stressed thermal power plants that have not been able to make use of the situation due to lack of finances to buy coal. As per industry sources, 85% of the volume bought on the exchange is from power distribution utilities. Discoms of northern states like Punjab, Haryana, Delhi and Rajasthan contributed to 55% of the buy bids at the exchange.
Tariffs in the spot power market have peaked as demand for electricity soared due to warm weather, agricultural activity and festive season on one hand, and decline in hydro and wind power generation, along with inadequate coal stock and logistics on the other. Industry sources said several power plants like Rattan India Amaravati 1,080 MW, GMR Warora 300 MW, 1,320 MW KSK Mahanadi and Dhariwal having power purchase agreements with discoms are non-operational due to lack of coal supply.
A questionnaire sent to the coal ministry remained unanswered.
A senior executive with a power firm said the government should consider allocating coal on priority basis to plants with an existing PPA serving states, which currently have demand surge and operating on tolling mechanism.
While some experts said some states are taking the 24x7 mandate to supply electricity very seriously, others said the states are likely to be preparing ground for assembly elections.
“High spot tariff is due to mix of factors like high electricity demand, reduced power generation from wind and hydro sources coupled with domestic coal shortages. We expect prices to remain firm in the medium term due to increased power demand with more focus on reliable power supply amid upcoming elections. On coal front, the issue is more of logistics availability than production,” said Sabyasachi Majumdar, group head, corporate ratings, ICRA.
However, since most states buying high cost power from exchange are not going to polls any time soon, PwC GRID partner Kameswara Rao said, “In my view states are taking the Tariff Policy Amendment, which mandates uninterrupted power supply to all consumer categories by the financial year-end, seriously. There is a visible and evolving change in mindset to improve supply standards.”
The all India peak demand touched 176 GW on September 18.
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