Gencos with high input cost allowed to sell power at up to Rs 50 per unit: CERC

New Delhi: Power generating companies that incur high variable costs due to fuel expenses and other charges will soon be able to sell electricity at a price of up to Rs 50 per unit on energy exchanges. The relaxation in norms by the Central Electricity Regulatory Commission (CERC) will provide relief to three category of power generating companies (gencos) including, those running their plants on expensive natural gas (RLNG), imported coal and using Battery Energy Storage System (BESS). At present, there is a price ceiling of Rs 12 per unit in the Day Ahead Market (DAM) on the energy exchanges.

Gencos have high variable costs for operating plants

With the ceiling, gencos having high variable costs for operating their plants are generally not keen on selling electricity on the energy exchanges and this in turn results in stranded power generation capacity.

Against this backdrop as well as the upcoming summer season, the CERC, earlier this month, allowed the introduction of a new segment including, High Price Day Ahead Market (HP-DAM) on the energy exchanges wherein electricity can be sold and bought at a price as high as Rs 50 per unit.
"The Commission hereby approves the proposal of the petitioner to introduce HP-DAM," the regulator said.

Upper price limit of HP-DAM at Rs 50/kWh allowed: CERC

The order came after a petition was filed by the Indian Energy Exchange (IEX) seeking the introduction of the new segment. "We have decided to allow the upper price limit of HP-DAM at Rs 50/kWh keeping in view the emerging trend in imported gas prices and the latest data of GRID-India (national electricity grid operator)," the CERC said.

The regulator also said that it would undertake periodic review of this upper price limit based on the highest cost of generation and other relevant global and domestic factors, including the impact of HP-DAM on other markets.

However, the regulator has not kept floor (minimum) price of power for the HP-DAM market. "We are of the considered view that keeping the floor price of '0' will incentivise the eligible HP-DAM sellers as they would able to achieve the technical minimum and this would help in attracting liquidity into this new market segment. Thus, we agree with the petitioner's proposal to keep the floor price of '0' for HP-DAM," it said.

CERC allowed 3 categories of power generators to participate in HP-DAM

The CERC has allowed three categories of power generators to participate in the HP-DAM market including, gas-based generating stations using imported RLNG and naphtha, imported coal based generating stations using only imported coal, and BESS. The category of generating stations eligible to participate in the HP-DAM will be reviewed periodically by the regulator. The demand for electricity is expected to touch 230 GW in April this year.

The Ministry of Power has already asked 15 imported coal-based plants to run at full capacity from March 16 to June 15 to avoid any shortfall in electricity supply during the summer. Such plants have also been permitted to pass through high price of imported coal used for generating electricity.

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