450cr Benefit for Industrial Open Access Consumers

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imagesOpen access industrial consumers saved about Rs 450 crore by taking advantage of falling electricity prices at power exchanges in May even as the state electricity boards (SEBs) stayed away from the power market due to cash crunch.

Electricity users with more than 1 MW of load are deemed as open access consumers who can meet their power requirements from sources other than the local discom. Industrial units purchased 1.23 Million units, nearly half of the electricity quantum sold during the month through the two operational power exchanges — Indian Energy Exchange (IEX) and Power Exchange of India (PXIL). The average price of electricity sold at the power exchanges is estimated at Rs 2.35 per unit.


Given that tariff charged by the discoms from industrial consumers is in the range of Rs 6 per unit, the savings accruing to the latter from purchase of electricity from power exchanges works out to Rs 448 crore. The IEX accounts for 97% of the total power volume trade through power exchanges in India while PXIL has 3% share.

Spot electricity prices have fallen by 40% at power exchanges during last one month due to a weak demand and increased supply of cheaper hydropower in the northern region. The average electricity price for day ahead supply at IEX ruled at Rs 2.12 per unit on Monday compared with Rs 3-3.5 per unit for electricity available under long-term power purchase agreement (PPA). On an average, sales bids for 150 million units of electricity are received per day at the IEX against buyers who are available only for 80-90 million units.

“Though industrial open access consumers are taking advantage of cheaper power, the same is not being availed by the discoms. The latter should also look at the variable cost of their long-term tied up power and purchase more through exchange and less from them.

Spot electricity prices at the IEX is currently ruling at Rs 1.59 per unit  an all-time low for a peak month like June. This price is applicable to all parts of the country except the southern region which remains cut off from the national grid. Prices of merchant power are much higher for supply to the southern states due to factors like transmission constraints and massive power shortage in the region.

Due to slow and inadequate electricity tariff hikes, discoms’ combined losses have crossed Rs 2 lakh crore. The Centre has approved a Rs 1.9-lakh-crore bailout package for debt-ridden discoms. However, the scheme is yet to be implemented. Until the financial package is implemented, financial health of discoms is unlikely to improve significantly.

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