Connectivity to lower exchange rates, increase volumes

Power rates to slip from Rs 5 a unit to Rs 4 a unit as states get connected to the national grid

Short-term power rates in the southern region might slip as much as 25 per cent with the states there getting connected to the national power grid. However, power exchanges are not worried yet. They claim the increased flow of power will raise volumes and in spite of lower rates, they expect to be net gainers.

“The tariffs (rates) will reduce from the current Rs 5 a unit to Rs 4 a unit. But the volumes will increase,” said S N Goel, chief executive officer of Indian Energy Exchange, the largest in the country. As much as 1,500 Mw of power is expected to flow via the extended lines, and as much as 200-250 Mw of this load would come to exchanges. “That would be four to five billion units per annum,” he said.

The southern region is more power-deficient than the rest of the country, and the states there are net buyers on the exchanges, with the highest inter-region rates. “For April-December 2013, southern states experienced a 7.3 per cent power deficit, while the rest of the nation experienced one of 3.4 per cent. The peak demand-supply situation is even more imbalanced, with a deficit of 12.5 per cent for southern states against less than one per cent for the rest of the nation,” said a report by UBS. The south also has a huge industrial power demand.

However, these changes might not reflect for now. Currently, only one of the lines is active, carrying 450 Mw. While the second line is expected to be added by March, experts feel it will be ready only by August.

The delay might cost power exchanges in two ways. They would not only lose the volumes they could have gained but also miss on the election surge. In the previous general elections, there was big spurt in spot power rates, as high as Rs 9-10 a unit. “They will miss out on this,” said Pradeep Lenka, former chief executive of Aditya Birla Power.

State-owned power companies NTPC and Power Grid would benefit from the grid commissioning, as the former’s capacity utilisations would improve, and the latter’s lines would go live.

Amongst private companies, Jindal Steel and Power and Adani Power are expected to gain from a marginal increase in rates and more demand for short-term power, which is yet to be contracted.

Lenka also says the peripheral connectivity to distribute power from the lines should also be charged, to allow the flow of electricity. “It will not take off until all the supply lines are connected,” he said. Agrees a senior executive of Power Exchange of India, “We will gain but not very soon.”

Goel, however, writes off missing on the election spurt. “We did not have any great gain from the last four Assembly elections. It would all depend on how much the distribution companies are ready to buy,” he said.