High Price Day Ahead Market Launched to Curb Exorbitant Electricity Rates

On March 10th, 2023, Union Power and New & Renewable Energy Minister R.K. Singh launched the High Price Day Ahead Market and Surplus Power Portal (PUShP) to ensure greater availability of power during the peak demand season. The portal was introduced at a virtual function in New Delhi, with over 200 stakeholders from state governments and the power sector in attendance.

Background of PUShP Initiative

Last year, the Ministry of Power observed that the prices in the electricity exchange had gone up to Rs.20 on some days. As a result, the ministry directed the Central Electricity Regulatory Commission (CERC) to cap the price at Rs.12 to prevent profiteering. This move rationalized the price for buyers and prevented power producers from charging exorbitant rates.

This year, the demand for power is expected to be much higher than last year, which is why the government has introduced a separate segment called HP DAM for gas-based plants and imported coal-based plants. These segments may have a cost of generating power higher than Rs.12, and the HP DAM will ensure that these plants can be scheduled and utilized to meet the power demand.

Operation of HP-DAM

The Minister explained that the HP-DAM was part of the government’s overall strategy to ensure that all available power capacity is utilized to supply power to consumers. He emphasized that no one would be allowed to charge exorbitant rates, and only those generating capacities that have a cost of producing power of more than Rs.12 per unit would be allowed to operate in HP-DAM.

If the cost of production is less than Rs.12, the generators will have to offer power in the Power Exchange’s Integrated Day Ahead Market (I-DAM) with a ceiling price of Rs.12. The CEA and Grid Controller have been instructed to ensure that prices in the HP-DAM are reasonable and take necessary action to prevent power producers from charging exorbitant prices that exceed the cost of production.

Benefits of the Surplus Power Portal

The surplus power portal is a unique initiative that reflects the ingenuity of the Ministry of Power and the Regulator. Distribution Companies (DISCOMs) have tied up long-term Power Purchase Agreements (PPAs) for power supply and must pay fixed charges even when they do not schedule the power. With the new surplus power portal, DISCOMs can indicate their surplus power in block times, days, or months. Those who need power can requisition the surplus power, and the new buyer will pay both variable charges (VC) and fixed costs (FC) as determined by the regulators.

Once power is reassigned, the original beneficiary shall have no right to recall, and the entire FC liability is also shifted to the new beneficiary. The financial liability of the new buyer shall be limited to the quantum of temporarily allocated or transferred power. This will reduce the fixed cost burden on the DISCOMs and enable all available generation capacity to be utilized.

Ministers and Officials Share their Views

During the launch event, the Union Minister emphasized the importance of the new initiatives to ensure adequate power supply during the summer months. He expressed confidence that the HP-DAM and surplus power portal would be effective in ensuring better utilization of capacity at a reasonable rate.

Minister of State of Power and Heavy Industries, Krishan Pal Gurjar, stated that nobody could now imagine life without power, and he expressed confidence that the new mechanism would ensure adequate availability of power.

The launch of the PUShP portal is a one-of-a-kind initiative that reflects the ingenuity of the Ministry of Power and the regulator. The portal will enable all available generation capacity to be utilized, which will help in ensuring adequate power supply during peak demand season.

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