Spurred by the cheap electricity tariffs quoted on the Power Exchanges (PXs), industrial consumers and some of the more price-savvy distribution utilities are crowding the bourses to strike short-term deals.

As a result, power traders such as PTC India Ltd and NTPC Vidyut Vyapar Nigam are feeling the heat, with competition from the PXs beginning to loosen the stranglehold of traders over the country's electricity spot market.

In 2010-11, the value of deals on the PXs surged to Rs 5,389 crore, a 51 per cent growth (or Rs 1,826 crore in absolute terms) over the deal values clocked the previous fiscal. Volumes more than doubled on the bourses. Correspondingly, the bilateral trader market, or short-term deals executed through a power trader, was down by almost Rs 800 crore during the year even as volumes remained flat.

One of the key reasons for the PXs gaining favour over the traders is the lower electricity prices discovered on the two operational bourses — IEX and PXIL.

At Rs 3.47/unit, the average price on the PXs was a good Rs 1.30 lower than the corresponding price of Rs 4.79/unit for deals involving traders in 2010-11. As a result, the gap between the volumes for deals involving traders and those transacted on the PXs has narrowed sharply last fiscal.

“Industrial consumers and utilities are realising that the transparent pricing mechanism that the Exchanges offer translates into cheaper tariffs as price discovery happens without any human intervention,” a senior executive with IEX, the country's largest power bourse, said.

Besides, the average prices quoted in the country's spot market were considerably lower in 2010-11 compared to the previous fiscal, both for PXs and deals involving traders. Thanks to the surge in business on the bourses, cumulative deal value surged to Rs 18,657 crore in 2010-11.

The short-term power market, involving trades spanning a time-frame of one year, comprises just around 10 per cent of the total energy generated in the country.

Till recently, over-the-counter (OTC) deals — or trades that happen outside the PXs on a bilateral basis between utilities or through traders — dominated the transactions through the bourses.

“In case of deals involving electricity traders, prices are negotiated. Even though the trader's margin in such back-to-back deals is capped by the regulator, there is ample scope for price manipulation,” a power market expert said. However, it needs to be noted that OTC prices are for monthly, customised contracts whereas the PX prices are for spot standardised contracts.

Related Topics