The Hindu : Business : CERC fixes trading margin at four paise a unit

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Friday, Jan 27, 2006

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Business

CERC fixes trading margin at four paise a unit

Special Correspondent

Move likely to affect revenues of companies: industry sources

NEW DELHI: The Central Electricity Regulatory Commission (CERC) on Wednesday fixed a trading margin of four paise a unit for electricity traders. The decision, say industry sources, is likely to affect the revenues of companies such as PTC India, Tata Power Trading and Adani Exports.

In an official release here, the CERC said: "The Central Electricity Regulatory Commission has decided to fix the trading margin at four paise per kWh for traders, who have been given licences for engaging in inter-State trading of electricity.''

The move, it said, was directed at protecting the consumers while providing a reasonable return to traders.

The new margin does not include transmission charges, application fees, unscheduled charges and transmission losses, the release said.

In September last, the power regulator had proposed to fix a trading margin at two paise a unit but traders had opposed the move. "The electricity traders were generally not in favour of fixing of trading margin but, on the contrary, the buyer distribution utilities and consumers had welcomed the proposal... After examining various comments, it has been decided to fix margins at a `reasonable' level of four paise per unit,'' the CERC said.

The power regulator noted that nearly 90 per cent of trading during 2004-05 was done at a margin of five paise a unit or less, but by the first half of the current fiscal it increased to a weighted average of ten paise a unit. In fact, 68 per cent of the volume traded during the period carried a margin of six paise a unit or more despite the fact that the CERC had simplified the `Open Access' regulations in 2005.

"The instance of the highest trading margin in a single transaction in 2004-05 was 43 paise/kWh and in the first half of 2005-06, it was 128 paise/kWh,'' it said.

The CERC noted that the existing overall power shortage is likely to continue in the near term.

A major portion of the electricity generated is sold to distribution utilities at regulated prices and only about two to three per cent of sales/purchase, amounting to about 15 billion units annually, takes place through the bilateral trading route.

"Traders by themselves are not producers, and competition among them to capture the meagre surplus power has resulted in raising the prices rather than bringing them down. Thus, there is a need to ensure that the traders do not take undue advantage of the deficit situation," the CERC said.

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