Thiruvananthapuram: The demand for electricity spikes in summer. The greater the demand higher the price. In a move that could push up tariff the Central Electricity Regulatory Commission has allowed Indian Energy Exchange where 90% of the power transactions take place to open a special platform where electricity could be sold for up to Rs 50 per unit. This could ultimately have a cascading effect on general prices.

Electricity produced from natural gas and imported coal will be sold through the special platform. It is expected that the process will begin by next month.

In the ordinary markets of the power exchange, Rs 12 is fixed as the rate per unit. But for the past two months, sufficient electricity has not been available even at Rs 12 per unit.

It is estimated that the consumption of power in the country will go up to 2.3 lakh MW in summer. The hope is that there would be entities willing to buy power at higher prices in order to avoid power cuts.

The power producers will be reluctant to sign cheaper and short-term contracts if there are entities willing to buy electricity at high prices.

For instance, the Kerala State Electricity Board has signed a short-term contract to buy power at Rs 6 to Rs 8 per unit from next month till May. The current KSEB tariff will be in stark contrast to a scenario when power is sold at Rs 50 per unit. Nearly 85 per cent of the over one crore domestic consumers in Kerala use between 0 and 250 units a month and they pay far less than Rs 10 per unit!

Power trade

There are three power exchanges that trade in power in the country. There are power plants utilising natural gas with an installed capacity of 27,000 MW and plants running on imported coal with a capacity of 18,000 MW in the country.

The price of electricity produced from natural gas is Rs 40 per unit while that for imported coal it is Rs 16. Owing to this, there is not much of production and sale happening in these plants. The aim of establishing the new market is to sell this electricity.