Electricity prices at power exchanges might be cheaper than power purchase agreements for now but it is not a long term solution, said the Delhi Electricity Regulatory Commission's Chairman PD Sudhakar.

He added that long term power purchase agreements also cannot be simply wished away.

Sudhakar was speaking at an Assocham conference on electricity, a day after it emerged that Delhi Government has written to the Union Power Ministry for surrendering 2,255 MW of power sourced from long-term power purchase agreements with Central public sector units.

While Sudhakar agreed that surplus power from long term agreements should be diverted, he did not agree with the commonly held view that sourcing electricity from power exchanges is a viable option.

"Right now power is available at cheaper rates at the exchanges because stressed discoms are not buying power and generation companies are making a panic sale. In a long term perspective, this is not sustainable," said Sudhakar.

"Ideal situation would be to have PPAs for a base load. In a place like Delhi it could be 4,000 MW. Rest can be sourced from power exchanges as and when required," he added.

Meanwhile, Delhi's Minister for Power Satyendar Jain said that the State Government has sought the surrender of 2,255MW as it is surplus to requirement and being procured at a costly rate.

"Delhi's peak load requirement is 6,000MW but its average requirement is only 3,000 MW. Yet, to meet the peak load, we are in talks with some generating companies who are ready to sign power purchase agreements at Rs 3 a unit. We also have the option to source it from power exchanges," said Jain, who also holds the portfolio for Health, Industries and Public Works Department.

Jain also questioned NTPC's differential tariffs for its plants and raised objections to the public sector company selling power at above Rs 5 a unit to Delhi while selling it at Rs 2.15 a unit to Gujarat.

On the coal block asked for by the Delhi Government, Jain said it is likely to be allocated a block by September-October.

As regards the annual tariff revision, Jain said it is prerogative of the DERC but the State Government is seeking a reduction in tariffs as against a hike sought by the three private discoms -- Tata Power Delhi Distribution Ltd, BSES Rajdhani and BSES Yamuna.