The Central Electricity Regulatory Commission (CERC) on Friday capped all the market segments on power exchanges at ₹12 per kilowatt hour (kWh), or unit, due to the increasing trend of rising prices on account of supply shortage and sudden increase in demand. The order will be in force till June 30.

The regulator after a review of the market activities took a stern view on the “alleged profiteering” by sellers including some Discoms. CERC had already capped the Real Time Market (RTM) and the Day Ahead Market (DAM) at ₹12 per unit from the earlier ₹20 on exchanges on April 1.

Protecting consumers

CERC said, “In view of the analysis of price trends in the preceding paras and in order to balance the interests of investors in terms of reasonable return and protecting consumer interests, the Commission hereby directs the power exchanges, from the date of this order till June 30, 2022, to redesign, with immediate effect, their software in such a way that members can quote price in the range of ₹0/kWh to ₹12/kWh in DAM (including G-DAM), RTM, Intra-day, Day Ahead Contingency and Term-Ahead (including G-TAM) Contracts.”

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The contracts, which have already been transacted till the date of issuance of this order, shall be delivered and settled as per the earlier terms and conditions, it added.

“Application of the price ceiling for a limited period is based on the belief of the Commission that intervention in the market should not be prolonged unless absolutely necessary in public interest as in the existing circumstances prevailing in the country,” CERC pointed out.

CERC said that analysing the recent behavior in volume and prices at the power exchanges, based on the daily trade information published by them reveals that buy bid in DAM registered an increase of about 28 per cent in April as compared to March, while that in RTM increased by 144 per cent during the same period.

However, the cleared volume in DAM registered a decrease of about 30 per cent in April compared to March, while that in RTM decreased by 16 per cent during the same period.

Volume traded

The volume traded in Term Ahead Market (TAM), Intra-day and Day Ahead Contingency (DAC) in April 2022 witnessed an increase of about 120 per cent over the volume traded in March 2022. Of the total volume traded in TAM, Intra-day and DAC contracts around 37.31 per cent was traded at price in excess of ₹12/kWh in April, – above the ceiling price of Rs.12/kWh in the DAM and RTM market segments, it said.

“It has also been observed that the difference in ceiling price between DAM/ RTM and TAM has led to a shift in supply volume from DAM/ RTM to TAM. Representations have been received from some States highlighting that this is affecting their prospects of getting power from DAM/ RTM segments of the power Exchanges and they have to go to the TAM segment for meeting their demand,” CERC said.

Some Discoms have also represented that the differential pricing between DAM/ RTM and TAM/ Intra-day/ DAC market segments is influencing the behavior of the sellers and have expressed concerns about the likely profiteering by sellers on account of the price differential in the two market segments in the Power Exchanges, it added.

On the price ceiling if ₹12 a unit, the central commission said that analysis reveals the energy charge of the marginal generator to be in the range of around ₹9 per kWh. In addition, if the expectation of recovery of part of the fixed cost and transmission charge are factored in, the ceiling price of ₹12 per kWh “seems reasonable”.

The power exchanges are directed to submit the compliance of this direction within two days from the date of this order.