Kerala State Electricity Board sticks to long-term deals despite price crash
The Regulatory Commission Said that the competitive price offered by short-term markets would serve state's interests better.
Thiruvananthapuram: Years before, when power purchase costs hovered high, the most scathing charge against KSEB Limited was that it was not farsighted enough to strike long-term deals. Things changed post 2013, when long-term deals were struck to guarantee nearly 1000 MW of power annually at an average of Rs 4 per unit for 25 years. But now, with power prices crashing, KSEBL’s long-term strategy is being frowned at.
The Electricity Regulatory Commission itself has advised KSEBL to give short-term markets prominence over long-term deals. It said that the competitive price offered by short-term markets would serve the state’s interests better. “KSEBL should procure about 10 to 15 percent of the daily demand from short-term market and balance only need be met through long-term contracts,” the Commission said.
The short-term market including transactions through energy exchanges in the country have been maturing over the years. “The prices of electricity derived through the short-term market, including exchanges, especially during night off-peak hours is much less than the rate derived through long-term contracts,” said Basil Mathews, a power trader. The average power price in the short-term markets is Rs 2.5 per unit.
It is also felt that effective conservation measures have brought down the state’s power demand. The actual energy demand in the state has been less by about 8 percent compared to the energy requirement estimated in the 18th Electric Power Survey Report. The ERC has even temporarily put on hold a long-term deal for 100 MW from Meija Power Plant of Damodar Valley Corporation.
However, KSEBL has no plans to alter its long-term strategy. “There can be nothing more unstable than the short-term markets. Let us not be deceived by the rains and the consequent fall in demand at this point. The prices can go up any time,” said KSEBL's director of transmission Ms P Vijayakumari. “We just cannot throw caution to the winds and depend solely on volatile short-term markets,” she added.