The Indian Ministry of Power has warned states that federal power producers would curtail supplies of electricity to them if their utilities are found selling power on exchanges to take advantage of surging prices.
Asia’s third-largest economy is facing large-scale outages as several power plants have low coal inventories amid a sharp spike in global energy prices.
Some states, instead of supplying electricity to their consumers, are imposing rolling power cuts known as load shedding, and selling power at higher prices to energy exchanges, the ministry said in a statement, without giving details.
States that do this risked having federally supplied power, known as unallocated power, cut, the ministry said.
If states are not serving their clients, but are “selling power in the power exchanges at higher rate, the unallocated power of such states shall be withdrawn and allocated to other needy states,” it added.
Federal government-controlled power producers such as NTPC Ltd and Damodar Valley Corp, sign long-term power purchase agreements with distribution companies for sale of most of their output.
However, 15 percent of their power is controlled by the federal government, which sells the so-called unallocated power to states.
The ministry said if any state had a surplus of power, it should inform the federal government, which would allocate that electricity to states that needed it.
The federal government warning comes after many states have complained of high power prices on exchanges, which have helped Indian Exchange Ltd shares surge to record highs in recent days.
Chief Minister of Andhra Pradesh Y. S. Jagan Mohan Reddy wrote Indian Prime Minister Narendra Modi to complain about the rising prices on exchanges, which he said had trebled to 15 rupees for a unit of power from the middle of September to Friday last week.
Reddy asked for an increase in the supply of coal, according to a copy of his letter, reviewed by Reuters.
Day-ahead prices of power at Indian Exchange have surged to 20 rupees a unit, information on its Web site yesterday showed.
The chief minister of New Delhi on Saturday warned of a power crisis, because of the coal shortage that has already brought electricity cuts in some eastern and northern states.
The power ministry directed NTPC and Damodar Valley to ensure supplies to the capital’s distribution companies.
Separately, China’s state planner, the National Development and Reform Commission, yesterday said that it would fully liberalize pricing for electricity generated from coal, and that industrial and commercial users would all have to buy from the market.
The commission said, giving no specific time frame, that 100 percent of electricity generated from coal-fired power would be priced via market trading, up from 70 percent now.
Industrial and commercial users “as soon as possible” would have to buy directly from the market or via agents over the power grid, up from 44 percent of such users who currently buy direct from the market. Other current buyers pay fixed prices.
The reforms are Beijing’s latest effort to deal with an energy crisis gripping the world’s second-largest economy that is expected to last through the end of the year.
Analysts and traders have been forecasting a 12 percent cut in industrial power consumption in the fourth quarter because coal supply is expected to fall short this winter.
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