CERC caps spot power price at Rs 12 per kWh amid rising power demand

Power sector regulator Central Electricity Regulatory Commission (CERC) has capped the maximum power price on power exchanges to Rs 12 per unit from the earlier limit of Rs 20 per unit, amid rising power demand.

The electricity regulator has directed power exchanges to adjust their software immediately to allow a highest price bid of Rs 12 a kilowatt hour (kWh). CERC, in its order, said buy bids on power exchanges have been more than double of the sell bids, indicating higher demand and lower supply. The order comes as the market clearing price (MCP) has been frequently hitting the ceiling of Rs 20 per kilowatt hour (kWh).

This move could help put a halt on frantic purchases by discoms and other bulk buyers, who have resorted to increased buying from the spot market to meet surging demand driven by summer temperatures spike and tightening coal supplies.

CERC in its April 1 suo moto order directed to power trading exchanges said, "The Commission has been regularly monitoring the prices of electricity traded in the Day Ahead Market (DAM) and Real Time Market (RTM) at the power exchanges. It is observed that the prices discovered at the power exchanges have remained significantly high during the last few days."

CERC also stated that the factors like rise in temperature causing early onset of summers and increase in economic activities with lifting of COVID-19-related restrictions, have contributed significantly to the increase in electricity demand. On the other hand, increase in the supply has been limited.

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The regulator also mentioned that the gap between demand and supply is also due to geo-political factors affecting the fuel supply and certain domestic supply constraints.

It further said, "Needless to say, such abnormally high price, even for a short period, without any significant impact on increase in
supply is not only against consumer interest but also erodes the buyer’s confidence in the market’s credibility."