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Home News Power Sector News Despite low prices, short-term power deals find few takers

Despite low prices, short-term power deals find few takers

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MSEDCLThere are few takers for contracts in the short-term power market. With distribution companies reluctant to draw power due to financial problems and selective allowing of open access by states, prices have crashed to Rs 2.50 per unit from Rs 7 per unit at one time. Around five per cent power goes through this route, which has two exchanges. The market was introduced after the Electricity Act of 2003.

Data from state utilities and power exchanges show the number of short-term applications across the country to be 150 in this month, from 400 in December 2009. These applications are received by regional load despatch centres for scheduling of power.

The fall in demand is forcing power generators to sell embedded distribution companies only. Further, distribution companies are reluctant to buy power through traders or merchant power plants, despite their quoting lower rates.

Indian Energy Exchange (IEX) sources said: "There has been an improved power situation, largely due to better hydro generation and water availability. However, a large number of states are not willing to supply power to areas with high distribution losses. State utilities prefer load-shedding and demand cuts due to paucity of funds. More important, open access is not being granted by many states, particularly to industrial consumers, despite shedding load on these categories of consumers." IEX's daily turnover is 35,000 Mw-hours and sources saye prices have fallen to Rs 2.50 per unit.

Power Exchange India (PXI), whose daily turnover was 7,000 to 8,000 Mw-hours has a similar story. PXI sources said: "States are not fulfilling the universal service obligation as mandated by the Electricity Act, 2003. A large number prefer to shed load than to procure power. For example, Maharashtra continues to carry out daily load shedding to the tune of 4,000 Mw, despite the availability of power in the short-term market."

Maharashtra State Electricity Distribution Company (MahaVitaran) sources admitted to load shedding instead of procuring power from the short-term market.

D Radhakrishna, sector analyst, says the main reason for the crash in the short-term market is that utilities, which are prime buyers, are showing reluctance in buying costly power and selling the consumers at a rate fixed much lower.

"Actually, this trend is good, as it will avert ‘California Shockâ€TM, in which there was bulk buying from traders at a high cost and retail consumers refused to pay . The recent tenders invited by Andhra Pradesh, Maharastra and Tamil Nadu for buying power for January on have also received astonishingly low rates of Rs 3.50 per unit. Some states have started arrangements under which they take power now and return it during the June-August months. It is risky as a good rainfall will boost hydel power, as experienced during the current year."

An analyst with a broking firm said: "The message is clear, that power trading must come to its real objective, that consumers will have a choice at a market-driven price and regulators must pave the way for industrial consumers or commercial consumers to opt for the external market at lower price. Issues like cross-subsidy and energy accounting need to be thrashed out."

Source- Sify


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