The electricity regulator, the Central Electricity Regulatory Commission, has revised the maximum electricity price on power exchanges to Rs 12 per unit from Rs 20 per unit, bearing in mind desperate purchases by public electricity distribution companies to meet demand.

The intervention, taken after 13 years, was done in the interests of consumers and reduced the risk of profiteering by power generation companies, sources said. The Union Department of Energy, in a communication to CERC on March 26, expressed concerns about high foreign exchange prices.

The commission, in its order, said bids to buy on power exchanges were more than double the bids to sell, indicating higher demand and lower supply. Aggressive bidding in a desperate scenario by buyers leads to high prices. On March 25, average spot electricity prices exceeded 18.7 rupees per unit while the maximum price frequently touched the ceiling of 20 rupees per unit.

Based on comments from the country’s network authority POSOCO, CERC said it is expected that this type of bid-demand position will likely persist for some time with a continued increase in demand as the summer is intensifying and that increased supply will not occur until May when wind and hydro-based generation is expected to come on stream.

“Given the fact that the price increase has not resulted in a commensurate increase in supply and that this position is likely to hold for some time in the coming days due to supply constraints and given the fact that 99% of the supply offers (for the days for which the data were analyzed) were around 12 rupees/kWh and only 1% of the supply offers were higher than 12 rupees/kWh, the Commission, in the exercise of powers under Regulation 51(1) of the PMR 2021 directs power exchanges until further notice to redesign, with immediate effect, the tendering software in such a way that that members can submit their bids within the price range of Rs.0/kWh to Rs.12/kWh for DAM (day-ahead market) and RTM (real-time market),” reads the order issued on Friday evening in a suo-moto affair.

Electricity demand increased significantly in March and reached 199 GW on March 17 and last week. Since then, it has fluctuated around 195 GW.

Faced with this increase in demand, on March 25, 58,719 MW of installed generation capacity was down for various reasons, with 4,323 MW of thermal capacity down due to a shortage of coal. The country also recorded a peak shortage of 4060Mw on March 25 after many years.

The high price of imported coal results in high variable costs for imported coal-fired power plants. Also, due to an increase in the international price of gas, existing gas-fired power plants are unable to sell to the market. Data available from the Central Electricity Authority showed coal stockpiles at power stations stood at 38% of the normative requirement and 78 power stations had critical coal stocks on Thursday.

The order specifies that this price moderation will be in line with current market realities and will not have a significant impact on the volume processed and will preserve the interests of consumers.