Maharashtra Discoms Turn Away From Costly PPAs to Energy Exchanges

Discoms in Maharashtra are turning to energy exchanges to buy cheaper power to protect margins, eschewing PPAs that command much higher tariffs.

With four-fifth of the economy shuttered for the third week, on account of COVID-19 control measures, pulling down power demand sharply, power utilities and Discoms in Maharashtra are turning to energy exchanges to buy cheaper power to protect margins, eschewing PPAs that command much higher tariffs.

Ever since the partial lockdowns to prevent the spread of the deadly virus began from March 15, power demand across the country has fallen steeply, and the energy consumption has declined by 21-22 percent to 2,628 GWh, according to an estimate by brokerage Emkay Global.

In Maharashtra, which is the most industrialised state, commercial activities have come to a nought since March 22, even before Prime Minister Narendra Modi announced a 21-day national lockdown ending April 14, significantly reducing power demand.

“Since demand is falling, most thermal power plants of Mahagenco have been backed down and we are taking electricity from hydel projects. Also, we are drawing power only from those private producers where the power purchase agreement (PPA) tariffs are low. “We are increasingly buying power from exchanges, which is cheaper than PPA tariffs,” an official from state utility Mahavitaran told.

Mahavitaran is the largest utility in Maharashtra but has no presence in Mumbai as the city is being served by the municipality-run BEST, Tata Power and Adani Electricity. The Mahavitaran official further said that during the same period last year, it was selling power to exchanges because of excess generation.

“However, since the demand is low now, shutting down thermal generation and buying cheaper power from the exchange is a financially viable model,” the official added.

On March 26, the peak demand in the state, excluding Mumbai, was 13,664 MW as compared with 19,029 MW on the same day in 2019.

“While we purchased nearly 1,100 MW from exchanges to meet the peak demand on March 26 – the third day of the complete lockdown, we had sold excess power on the exchanges last year,” the official added.

A spokesperson of Adani Electricity Mumbai said energy consumption has declined by around 30 percent since the lockdown.

Of its nearly 30 lakh customers, 80 percent are residential, and the rest commercial and others. “We are committed to supplying uninterrupted energy to customers, owing to which we maintain a good balance in sourcing between existing commitments and exchanges,” the spokesperson added.