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Politics cheers power trading companies in India

According to reports, polls may or may not disturb the seats of power, but power traders are clear winners in five states undergoing Assembly elections. The normally-quiet power trading market has seen hectic activity in January and February as poll-bound states rushed to buy electricity from the free market to avoid unpopular power cuts.

The over-the-counter power market, which accounts for roughly over half of all electricity sold through short-term contracts, grew 18% to 1,895 million units in January on a month-on-month basis. Of this, as much as 95% was sold at a price higher than R4 a unit. In comparison, only 81% of traded volume was sold at over R4 a unit price in December, as per available data.

Industry watchers attributed the spike in electricity demand to the ongoing elections. “The growth in volume of traded electricity is an election effect,” Pramod Deo, chairman, central electricity regulatory commission (CERC), told FE.

Major power traders, however, disagree that the high volume has anything to do with polls. Rather, they would try to explain it as seasonal growth in electricity demand. “We do not know much at this stage about what exactly led to the spike in electricity trading in January. Seasonal demand may have pushed up demand,” a top executive of a power company said.

While trading margins for traders have been capped at R0.07 a unit, merchant plants are free to sell their power at any price they can get because they sell own power. This possible upside has proved a key factor in attracting investment in merchant capacity. February data from the power market are still awaited.

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