In order to optimise the power purchase costs, especially short-term purchases from markets, the Andhra Pradesh Electricity Regulatory Commission (APERC) has directed the power distribution companies (Discoms) to establish a special cell to monitor the market prices.
The commission also noted that Rs 3.70 per unit would be a reasonable ceiling price for short term power purchases.
In the retail supply tariff order for financial year 2021-22, the commission elaborated its views on the short term power purchases against which several stakeholders including the public and the power sector employees voiced concerns. “This cell shall also be empowered to make the market purchases through exchanges while strictly adhering to the merit order. Such market procurement shall be gotten ratified by the Commission periodically,” it noted.
The commission had also constituted an expert committee to study the issue of short term power purchases and give recommendations for ratification of the short-term procurement so that the overall power purchase costs are reduced to the maximum extent to benefit the consumers besides protecting the interests of the power utilities. “Commercial prudence is very much essential while procuring power from the markets with a view to reduce the power purchase costs particularly when the approved sources are kept under reserve shutdown,” the commission said.
Further, the Commission also said that fixation of a ceiling price for short term purchases was necessary. “The commission feels that the fixation of a ceiling price is necessary to regulate the short-term purchases from the exchanges.
The prices in the exchanges are dynamic and depend on the demand and supply during a given time block and seasons. The price of `3.70 proposed by the Discoms for short term purchases during October and November, 2021 is reasonable. Accordingly, the same is approved and adopted by the Commission in the power purchase cost computations,” it said.
The commission, however, added that the month wise weighted average price from the exchanges shall not exceed the marginal per unit variable cost of `3.86 of the power station that is dispatched last in this order.
The commission observed that in order to reduce not only the short-term procurement cost but also the overall power purchase cost, there was a need to utilise the real time, day ahead or week/monthly ahead market by replacing the more expensive power from the approved sources with less expensive power from real time markets.
“While computing the landed per unit cost of power from such market sources holistically, the other applicable costs as suggested by AP State Electricity Board Assistant Executive Engineers’ Association also need to be taken into account in addition to the applicable Central Transmission Utility and State Transmission Utility charges,” the commission added.
