Kerala moves to procure electricity through broker companies: What it means for consumers

Kochi: The Kerala state government is considering a major change in how it procures electricity. High-level discussions are underway within the Electricity Board to shift electricity procurement to broker companies. This move is expected to impact both the state’s control over power purchasing and consumer electricity rates.

The state is looking at assigning this responsibility to Vidyut Vyapar Nigam Limited (VVNL), a subsidiary of the National Thermal Power Corporation (NTPC). Based in Noida, VVNL is a central public sector company involved in power trading. The goal is to transition the state’s electricity procurement to this broker company before the current Left government’s term ends.

Current electricity supply: Heavy reliance on outside purchases

At present, the state sources 70 percent of electricity from external providers. When power shortages occur, especially at night, the state often purchases electricity from power exchanges. This situation is currently managed by the System Operations Division of the Kerala State Electricity Board in Kalamassery, but the new proposal will hand over these responsibilities to a separate company.

Engineers express concerns over broker model

An online meeting was recently held with engineers from the System Operations Division at the Kalamassery Load Despatch Center. The engineers voiced strong opposition to the idea of bringing in broker companies for electricity procurement. 

According to the Electricity Act of 2003, the transmission of electricity falls under state government control. Across India, electricity procurement is typically managed by boards or companies. 

Increased costs for consumers

If the proposal goes through, consumers may face higher electricity costs. The trading margin for each unit of electricity purchased through an intermediary could range from 5 to 10 paise. Based on last year’s electricity purchases, the state would incur costs of around Rs 43.57 crore in commission and Rs 15 crore in consultancy fees, totaling Rs 58.57 crore. These costs are expected to be passed on to consumers, potentially raising electricity rates.