Poll effect: Spot electricity prices zoom in South

Spot prices of electricity in the southern region have zoomed to over Rs 12 a unit in the last couple of days, over four times the price quotes for the rest of the country on the IEX — the country's largest power exchange.

A key reason for spot electricity prices shooting through the roof in South India is the mad scramble among utilities in the region to arrange power to ensure zero power cuts before the polls in States such as Tamil Nadu, Kerala and Puducherry. Lack of adequate grid interconnection between the southern region and the rest of the country has compounded the problem.

Higher bills

While lesser power cuts may be good news for consumers, the bad news is that people in the southern States would, in the due course, would be expected to pay for the profligacy shown by distribution firms by way of higher power bills, as and when these utilities apply for a tariff revision with the regulator.

“The trend is in line with what we have seen before most polls, when Governments like to arrange power from all possible sources to avoid power cuts. But the major problem is the lack of adequate grid interconnection between the southern region and the rest of the country, which prevents surplus power to flow from the north to south during this part of the year and from the south to the north later during the monsoons,” Mr Jayant Deo, Managing Director and CEO of IEX, said.

Of the five regional grids in the country, the northern, eastern, western and the north-eastern grids are synchronised to form, what is termed as, the ‘NEW' grid while the Southern region has only limited interconnectivity with the rest of the regions.

The uptrend in price movements has been clearly visible since January in the build-up to the elections. On the IEX, which handles over 80 per cent of the electricity transacted through the two operational power exchanges in the country, the prices have surged from an average of around Rs 4 a unit in January to over Rs 6 in February, which is now at nearly Rs 9 in the first 21 days of March.

The average spot electricity prices across the rest of the country, meanwhile, have stayed below Rs 4 during all of the three months.

“The very reason that the southern States are resorting to buying big in the spot market, rather than strike long-term deals during the period, is clearly indicative of this being just a stop-gap measure. Once the elections are over, the frenzy will subside and it will be back to power cuts and outages,” an official with the Central Electricity Authority said.

The eastern region, where West Bengal and Assam are set for the polls, has not seen a perceptible spike in prices due to its interconnection with the northern and the western regions.

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