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Power ministry's new framework to lower electricity prices

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Power ministry's new framework will benefit the discoms, as well as generating companies and ultimately bring down some burden of electricity cost on consumers.

Power ministry's new framework to lower electricity prices
The power Ministry on Friday released a framework for the implementation of market-based economic despatch (MBED) to enhance competition in the power sector and lower the cost of electricity in India.
With this move, state discoms will now be able to plan power purchases from the day-ahead market at power exchange. The discoms will also get a chance to meet its electricity demand from the cheapest generating sources in India.
“It is widely recognized that an essential next step in reforming electricity market operations and in moving towards ‘One Nation, One Grid, One Frequency, One Price’ framework is to implement Market Based Economic Despatch (MBED) in the day-ahead horizon, initiated by the Central Electricity Regulatory Commission,” the Power Ministry said in a press release.
Overall, it will benefit the discoms, as well as generating companies and ultimately bring down some burden of electricity cost on consumers.
“MBED will ensure the cheapest generating resources across the country are despatched to meet the overall system demand. And will thus be a win-win for both the distribution companies and the generators and ultimately result in significant annual savings for the electricity consumers,” highlighted the press release issued by the ministry of power.
Around 5 percent reduction in the cost of power to the consumers from the implementation of MBED is expected.
The ministry plans to implement phase 1 of MBED with effect from 1st April 2022 with mandatory participation of the interstate generating companies. Other generating companies can also participate on a voluntary basis. The idea is to transition away from long term contracts and move towards more sustainable market-based operations.
“In the first phase, all inter-state generating stations will participate. This will lead to rising in volumes at exchanges. However, the clarity on transaction fees is missing for mandatory participation at exchanges. Prima facie positive for power exchanges. Low coal cost power producer may also benefit,” Mohit Kumar, Senior VP, DAM Capital said.
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