TN: Power suppliers quote up to Rs 37 per unit as demand surges

CHENNAI: Keen to avoid load shedding, a move that would earn the people’s ire and will thus entail a political cost, the Tamil Nadu Power Distribution Corporation Ltd has agreed to pay as high as Rs 37 per unit to suppliers under its latest short-term power procurement tender.

This is the highest rate to be paid by the State-run utility, which is battling a serious crisis due to delayed monsoon rains and persistent hot weather that is keeping electricity demand unusually elevated.

On October 6, TNPDCL had invited bids to procure 1,500 MW between midnight and 2 am, and 3,000 MW between 6 pm and midnight from October 12 to 31. It accepted bids ranging from Rs 31.99 to Rs 34.49 per unit for the early-morning slot.

Though the evening peak-hour rates went up to Rs 37 per unit, it still received bids for only 2,001 MW - 100 MW at Rs 33.37 per unit, 1,380 MW at Rs 35.92, 340 MW at Rs 35.93, and 181 MW at Rs 37.

A senior official said the State had been witnessing an unprecedented rise in demand, driven by the impact of El Niño. "Though the peak summer period has ended, power demand has gone up by 15% compared to last year. For instance, the State's peak demand stood at 17,887 MW last October, whereas the demand touched 20,060 MW on Saturday (October 10)," the official said.

The official attributed the increase in procurement costs to the end of the wind power season and poor reservoir storage that affected hydel generation.

"All suppliers who participated in the bidding were gas-based generators, hence the high cost of power. On the other hand, unlike coal-based thermal power plants, which have high fixed costs, gas-based generators have minimal fixed costs of less than Rs 2. If demand falls, they can stop procurement and only pay the fixed cost to the generators. In case of a sudden surge in demand, these companies will be able to supply power at short notice," an official said.

While some states have shunned high-cost purchases and are resorting to load shedding, the State government wanted to ensure uninterrupted power supply and was therefore willing to procure electricity at higher rates, he said.

A retired official wondered why the utility waited so long to float bids on such short notice. “If they had floated the bids earlier, they would have got much cheaper power. There is no point in procuring power at such high costs,” the official said.