Polls over, spot power prices crash in the South

Spot electricity rates crashed rather dramatically in the southern region on Thursday, exactly a day after polling got over in Tamil Nadu, Kerala and Puducherry.

The mad fervour among utilities in the region to arrange for power in order to ensure zero outages before the polls has predictably evaporated, now that the elections are over.

Scattered showers in parts of the southern region combined with a public holiday on Thursday may have been partly responsible for the moderation in power demand estimated by distribution utilities, analysts concede. But the coincidence of an almost linear uptrend in spot electricity prices till the polling day, and then the ensuing crash in rate the very next day, is difficult to ignore. Price quotes for Friday showed a further slide.

Price pattern

According to data from IEX — the country's largest power exchange — the spiralling spot prices in the southern region peaked at just over Rs 15 per unit on Wednesday, which was polling day in all three States, before sharply sliding to under Rs 10 on Thursday. This marked the first time that average price quotes for the region have touched single digits since the beginning of this month.

Quotes received for Friday — which shows another slide in the average price in the day-ahead market in the southern region to under Rs 9 — further corroborates that ensuring steady electricity supply before polls is yet another form of voter appeasement. It's back to power cuts and load shedding after the polls.

“While extraneous factors could be contributors to the trend, the drop in spot prices is evidence of lower demand, which means distribution utilities in the region have cut back on supply immediately after the elections.

“Buying big in the spot market, instead of striking long-term deals for the pre-summer months, was clearly indicative of this being just a stop-gap measure for these States till the elections are over,” an official with the Central Electricity Authority said.

The quotes received on IEX, which handles over 80 per cent of the electricity transacted through the two operational power exchanges in the country, show that prices in the southern region have been well over four times the rates prevalent in the rest of the country.

Poor interconnection

While demand patterns have a bearing, lack of adequate grid interconnection between the southern region and the rest of the country has compounded the problem, making it difficult for surplus power to flow to the southern grid.

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 in the three southern States. On the IEX, the prices surged from an average of around Rs 4 a unit in January to over Rs 6 in February, which further surged to over Rs 10 in 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 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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