State firms starve customers to earn more: CERC

State power utilities are cutting down supplies to their customers and resorting to short-term trading of electricity to earn more, the Central Electricity Regulatory Commission (CERC) has said.

Usually, state-owned electricity boards sell the surplus power in the short-term trading market to earn extra money. This only after the distribution companies meet the demand from their customers.

But with increasing power shortages, India’s power regulator, in a working paper released on its website, said: “This (referring to power deficit) has also enhanced the perverse incentive for distribution utilities to cut down the supply to their own customers and make money in the short-term market.”

With peak power deficit — the difference between the maximum demand and supply — reaching around 15 per cent in recent months, state utilities are paying more in the short-term market.

The CERC has estimated that the average cost of sale in short-term trading was Rs 7.24 per unit in the April-June quarter, as against Rs 4.64 in the same period a year ago.

The major players in the short-term trading market are some states with power deficits. West Bengal and Tamil Nadu, both power deficit states, had a market share of 4.09 per cent and 3.56 per cent, respectively.

It is difficult to establish that a state with power deficit traded power by starving its own customers as there could be times when it had surplus power after meeting all the demand. A senior CERC official said Orissa and West Bengal boards were alleged to have been involved in short-term trading even when they had not met the demand from their own customers.

“People blame us for trading power in times of deficit. This is entirely wrong. Whatever trade has happened, it has been carried out in off-peak hours between 5 pm and 11 pm,” said AC Malik, director (commercial) of Gridco, Orissa’s utility in charge of carrying out purchase and sale of power to four discoms and trading of surplus power with other states.

The West Bengal electricity board could not be reached for comments.

In the current financial year, Gridco has carried out trading of about 30 million units of power, of which 20.71 million units, about two-thirds, has been traded through the power exchange. This power has been traded at a price range of between Rs 2.50 and Rs 9. The rest has been traded bilaterally at a price ranging from Rs 5.50 to Rs 9.

“People should understand that we do not have enough agricultural load, and thus our requirement of power is quite low. Also, there have been enough rains in the past five months to allow us to carry out trading at different times because most of our power comes from hydel sources,” said Malik.

In these five months, Orissa has fallen short of 140 million units of power. While there has been a demand of 8,428 million units of electricity, only 8,228 million units have been met, according to data from the Central Electricity Authority.

“We are not increasing the rates. Gridco is not the determinant of rate at the exchange,” Malik added.