THIRUVANANTHAPURAM: The Kerala State Electricity Board (KSEB) was recently forced to purchase electricity at a staggering Rs20 per unit – one of the highest rates it has ever paid – during peak-hour shortages in August, highlighting the depth of the state’s power crisis during the monsoon season.
KSEB’s cumulative loss in nine months has reached Rs57.10 crore and the total borrowings stood at Rs17,391 crore. More importantly, the company sits on a precariously high negative networth of Rs33,124 crore as of December end, 2024.
In total, KSEB purchased 11.56 million units (MU) through the Term Ahead Market (TAM) in August and 44.47 MU in September, specifically to manage evening peak deficits.
“This certainly exposes the fragility of the system during monsoon, a time when our hydro generation should be at full throttle,” a retired senior KSEB official told businessbenchmark.news.
To put things in perspective, the average cost of supply for KSEB is typically in the range of Rs6.50 to Rs7.50 per unit, whereas the average billing rate or realisation (what KSEB earns from consumers across all categories) is around Rs5.50 to Rs6.50 per unit.
The emergency purchase in August last was triggered after bids through the Day Ahead and Real-Time markets cleared only 5 to 50 per cent of the board’s requirements on several days.
According to internal documents, KSEB faced a deficit of up to 800 MW during evening peaks in August and September 2024.
On August 12 and 13, when demand surged and no scheduled supply was available, KSEB was forced to overdraw from the grid at Rs20 per unit, prompting violation alerts from the Southern Regional Load Despatch Centre (SRLDC) for breaching frequency limits.
To prevent grid instability and avoid penalties, the board urgently secured additional power through TAM contracts.
Procurement strategy in focus
Though the board’s Full-Time Directors ratified the high-cost purchases later, the episode has reignited debate over the utility’s procurement strategy.
Critics have drawn renewed attention to a now-scrapped Round-The-Clock (RTC) power purchase agreement, which had reportedly offered firm power at Rs4.29 per unit and was cancelled by the current LDF government. However, energy experts argue that the cancellation and the current crisis are not directly connected.
“The Rs4.29 PPA and the Rs20/unit TAM purchases serve different purposes – one was a long-term base supply, the other a short-term emergency measure,” said an industry expert.
Still, the price disparity has raised eyebrows. “Paying Rs20 now while having walked away from a Rs4.29 deal earlier has surprised industry,” said a former KSEB official familiar with power planning.
The Ministry of Power’s Resource Adequacy Plan permits discoms to procure peak-hour electricity at high rates – up to Rs20 per unit – to ensure uninterrupted supply.
KSEB’s purchase, though expensive, was in line with these guidelines and crucial in avoiding widespread load shedding.
The board is expected to formally inform the Kerala State Electricity Regulatory Commission (KSERC) of the emergency purchase, as per regulatory norms.
The episode has once again exposed Kerala’s vulnerability to power supply shocks, even during monsoon months when hydel generation is expected to buffer demand.
Experts recommend better demand forecasting, a firmer long-term contracting strategy- especially for peak supply – and reduced dependence on volatile short-term markets.
