India’s power regulator has capped power exchange prices at 12 rupees per unit amid rising costs for imported coal and assured electricity demand at the start of the summer season.
“The commission, in the exercise of powers under regulation 51(1) of the electricity market regulations 2021, orders the electricity exchanges until further notice to redesign, with immediate effect, the software for ‘auctions so that members can submit their bids in the price range of Rs.0/kWh to Rs.12/kWh for the daily market and the real-time market,’ the Central Electricity Regulatory Commission (CERC) said in a statement. notification on April 1.
Regulation 51 of the PMR 2021 provides for the circumstances requiring the intervention of the CERC. CERC had asked exchanges to submit compliance with this directive within two days.
CERC said uncovered prices on power exchanges remained “significantly” higher over the past few days. He said factors such as rising temperature causing early onset of summers and increased economic activities with the lifting of COVID-19 related restrictions have contributed significantly to the increase in demand for ‘electricity. On the other hand, the increase in supply was limited.
The commission said the situation had worsened due to geopolitical factors affecting fuel supply and some domestic supply constraints.
“This has widened the gap between demand and supply, with the average bid-to-bid ratio reaching over 2 and a market clearing price frequently touching 20 rupees/kWh (which is the ceiling price imposed by exchange),” CERC said.
Bids to buy were more than double the bids to sell, indicating higher demand and lower supply, CERC said.
“Abnormally high prices on power exchanges, even for a short period, harm consumer interests and erode buyer confidence in the market,” he said.
The regulator said it observed that power exchanges had designed the bidding software so that members could submit bids in the price range of Rs 0/kWh to Rs 20/kWh. “In the current stress scenario, where demand on power exchanges is almost double the volume of supply, buyers place bids at the high end of the price band, i.e. say 20 rupees/kWh to make sure their offers are approved. This indicates a desperate buying scenario under current conditions,” he said.
According to CERC, electricity demand increased significantly in the month of March and reached 199 GW on 2022-03-17. Since then, it has fluctuated around 195 GW.