Electricity prices surge due to erratic rains

Inadequate monsoon rains, especially in the surplus states, and a surge in the “unscheduled interchange (UI) rate” have led to a rise in the prices of electricty in short-term trading.

The UI rate is a variable depending on the grid frequency. When the frequency dips below the stipulated level, the rate increases, which induces discipline among overdrawing power utilities.

The average price, which was ranging between Rs 3 and Rs 3.50 per unit since April till last week, has suddenly soared to Rs 4.70-4.85 per unit. On certain occasions, the price even soared to Rs 7 per unit.

“During the last few days, the temperature has risen, thus, increasing the humidity and the demand. The past week has witnessed the highest demand of up to 57 million units during the past few months. The movement in prices is dependent on the rainfall. If the condition is improved across the country, prices will come down,” officials at the Indian Energy Exchange (IEX) told Business Standard.

IEX is currently engaged in the trading of 25 million units of power in the day-ahead market.

On the other hand, Power Exchange India (PXI) sources said that electricity was now available at exchanges at a Rs 4.70-4.85 per unit “The distribution companies are not prohibited from implementing load-shedding, and as a result, there is widespread power cut. In addition, certain distribution companies do not allow their ‘high tension’ customers to avail short-term, open access power across a state or outside it, which leads to load-shedding and widespread dissastifaction among industrial customers,” PXI sources said.

PXI trades nearly 15 million units in the day-ahead market.

Further, sources at both the exchange explained that the recent rise in UI rates to almost Rs 18 when frequency comes to 49.2 Hz has resulted in over-protectionism by some sellers states like Gujarat, West Bengal, Chhattisgarh who are comfortable in drawing less power from the central pool and thereby underdrawing and earning revenue due to high UI rates compared to saving on market price. The distribution companies which have got more shortfall are comfortable in implementing load shedding due to rise in UI rates.