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Central Electricity Regulatory Commission (CERC) has proposed a tariff cap of Rs 11/unit for short-term power transactions on the two operational nationwide power exchanges IEX and PXIL and in the bilateral markets to rein in, what it called, runaway prices. The proposed cap on prices will be applicable for 45 days from the date of issue of the Commission’s final order, for which it plans to hold a public hearing with stakeholders on 08-09-2009.

Prices have surged in the short-term market to as much as Rs 19/unit (kilo Watt hour) on occasions during peak hours in recent weeks, prompting the regulatory intervention, according to a senior CERC official. At present, there are two power exchanges operating in the country — the Indian Energy Exchange (IEX) and the Power Exchange India Ltd (PXIL).

A CERC spokesperson said that the commission found out that price of power had escalated steeply both in bilateral deals and in trade through power exchanges. This, along with price volatility, was adversely affecting the interest of the consumers and the buyer's confidence in market's credibility. Hence, the Commission was considering initiation of regulatory measures to restrain escalation of prices so as to protect the interest of the consumers while ensuring reasonable return to the investors.

The spokesperson pointed out that between 9 am and 10 am, the price of electricity traded in the Indian Energy Exchange (IEX) had increased from Rs. 6.11 per unit on August 3 to Rs 14.50 per unit on August 13, a 2.37 times increase. Similarly, the prices had increased by 3.22 times from Rs. 4.50 per unit to Rs 14.50 per unit during this period in the Power Exchange of India Ltd (PXIL). Similarly, between 6 pm and 7 pm , the prices had increased by 2.89 times in IEX and by 2.91 times in PXIL.

CERC spokesperson further said that although the prices of coal, diesel, naphtha, gas etc. had remained stable during the above period, the power price increased sharply thus showing a disconnect between generation cost and supply price. The commission stated in the draft order that it could not ignore these realities that were contrary to the objectives of the Electricity Act that included protecting interest of consumers. Under conditions of shortage of supply of electricity such as the prevailing one, the Commission had been empowered under clause (a) of sub-section (1) of section 62 of the Act to fix floor and ceiling for prices. The Commission had been also mandated under section 66 of the Act to promote development of a power market.


Source - Times of India