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Tuesday, July 3, 2012

This Monsoon, it’s Only Raining Power Rates! Rates cross . 7/unit on most power exchanges

Power rates in energy exchanges have surged above . 7 per unit in most parts of the country and shot up to . 12 per unit in the southern states as a weak monsoon has raised demand while electricity supply remains shaky because of fuel scarcity and uncertain hydropower generation. The government maintains that the monsoon situation is not alarm ing and rainfall will revive in a week, but the prospects of El Nino which leads to dry weather in India have increased, according to a fore cast on Tuesday by the Australian weather office, whose predictions about the adverse weather phenom enon are keenly tracked interna tionally. If El Nino sets in, it would upset hydropower generation which peaks seasonally in the main monsoon months of July and Au gust, allowing coal-fired plants to undertake maintenance work. The monsoon is already 31% in deficit, leading to a sharp fall in water level in reservoirs, delay in crop planting and power shortage. 
The India Meteorological Department says the monsoon would be normal, although the threat of El Nino looms. "The chances of El Nino 
have increased. But it is more likely to happen after the four-month monsoon season ends. However,there are still 30-35% chances that El Nino may strike in the latter half of the monsoon," DS Pai, head of IMD's longrange forecasting division, told ET. Power rates have gone up in recent days, which have been exceptionally dry. The monsoon deficit widened from 23% on June 27 to 31% on July 1. Rain Deficit at 71% in North India 
The seasonal shortfall is 71% in north and northwestern India, and 36% in central India. 
The prolonged dry spell is hurting the power situation. Jayant Deo, managing director and CEO of Indian Energy Exchange, said the demand-supply situation has worsened due to the continued heat wave, pushing up peak-hour prices to Rs 7 per unit. 
Normally, the cost of power generation from thermal coal varies between Rs 2 and Rs 3 per unit. Deo said captive plants and independent power producers are benefitting from the rise in prices. 
"North India has not received enough rains and the summer heat is still on, so the utilities from north India are demanding more power. Although a lot of distribution companies are continuing with load shedding, they are buying power to reduce the time for load shedding. Industrial customers also are demanding more short-term power supply as well." Almost all state utilities are buying power from exchanges at higher prices due to inadequate availability of electricity from their regular sources, to maintain supply to consumers at current levels, industry officials said. 
The southern states are the worst hit as utilities there were paying more than Rs 12 per unit to buy power. Industry officials said high congestion due to transmission line constraints in the southern states have resulted 
in demand for power going up, leading to a rise in short-term power prices. 
Rupa Devi Singh, managing director and CEO, Power Exchange India, said the short-term power market, particularly the exchanges, failed to attract high-volume participants to balance the demand-supply mismatch. "The volatility in prices in this market is on account of the shallowness of the market. Even an additional demand as small as 500 mw can create a spike in prices. There is a need to develop the market and make it broad-based with longer-term tenure. As a dayahead market, it cannot absorb the demand shocks." 
Power sector officials, like farmers, are praying for a quick revival of monsoon. The delay is encouraging farmers to use pumps to draw groundwater while household consumption of electricity is high because of increased use of power for air-conditioning. 
(Rituraj Tiwari in New Delhi contributed to this report)


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