UP electricity regulator raps power department over procuring costly power

Says UPPCL has not exploited the potential of the power exchanges at all as there is no proper planning and execution

The Uttar Pradesh State Electricity Regulatory Commission (UPERC) has initiated a suo-motu hearing to question UP Power Corporation Limited (UPPCL) over procurement of costly power, ignoring cheaper options.

UPERC in its hearing said, “Why was UPPCL not buying power from power exchange, when power was available at cheaper prices there? Was the merit order being followed? If yes, then why was power being purchased from more expensive sources when cheaper power was available in the power exchange?”

The Commission has also rapped UPPCL for planning its power procurement mechanism. “The Commission after hearing all the stakeholders feels that the UPPCL has not exploited the potential of the power exchanges at all as there is no proper planning and execution.”

It also questioned UPPCL on its reluctance to source power from the exchanges where the process has come down substantially, below Rs 2 a unit on most days.

UP recently signed power purchase agreements (PPAs) of around 5,056 Mw with power producers in a price range of Rs 3.2 per unit to Rs 5.10 per unit. Business Standard reported earlier that the move by the state to sign fresh agreements at high rates comes at a time when power prices in spot market have touched a new low of Rs 2.5 per unit. The state officials had then denied procuring power from exchanges, citing fluctuating price.

Taking this into consideration, the Commission also noted if power was procured through exchanges, UPPCL could save substantially in power purchase, which is around 80 per cent of its annual revenue requirement, and this would effectively lead to lowering of consumer tariffs.

The Commission directed UPPCL two months back to submit detailed reply, explaining month-wise data of power purchased from various sources (with details of variable and fixed charges) vis-a-vis the prices prevailing at the same period in the power exchange, leading to validation of the principle of merit order being followed in power purchases made in FY15.

However, in its recent hearing last month, no such reply was received from any of the five power distribution companies of the state and/or the UPPCL.

UP had a peak power demand of 16,988 Mw during April-December 2015, of which only 14,503 Mw was met. Reeling under power cuts and irregular power supply, it suffered from supply deficit 14.6 per cent during the same period – one of the highest in the country.

POWER SHOCKER:

• UP Electricity Regulatory Commission hauls up UP Power Corporation over procuring costly power
• Asks to submit details on power purchase, amount, source and price
• Questions on reluctance to source cheap power from spot market
• UP recently signed long-term power purchase agreements in a range of Rs 3-5 per unit
• Prices in spot market have gone below Rs 2 per unit