India’s Cash-Starved Utilities Helped Crash Grid, Regulator Says

India’s cash-starved electric utilities, unwilling to buy power, are exceeding their allotments from the nation’s grid, which helped trigger the world’s biggest blackout, India’s chief electric regulator said.

The “financial position is not really sound, so they don’t have enough money to buy electricity,” Pramod Deo, chairman of India’s Central Electricity Regulatory Commission, said in an interview today during a conference in Washington. “So first thing is that you withdraw and hope that nothing will happen.”

Utilities will have to raise rates in order to buy sufficient power, he said. “Tariffs have to increase, and politically that’s very sensitive,” he said.

Deo said power was “more or less” restored in all areas after a blackout yesterday left more than 640 million Indians -- about 9 percent of the world’s population -- without power. The blackout forced homes and businesses to switch to back-up supplies, halted trains and public transport, trapped miners and caused traffic jams.

States usually arrange to buy electricity a day in advance, said Jayant Deo, managing director of Indian Energy Exchange Ltd., a market for buying and selling power. Some draw more power than was arranged in advance, resulting in penalties. When a buyer exceeds the contract, the electric flow on the grid drops, causing the system to collapse and power plants to shut down.

Committee Review

Deo said that while the blackout will be examined by a three-member committee, it appears a failure of a transmission line and very humid weather played a role.

R.N. Nayak, chairman of the state-run power grid, which carries half of the electricity India generates, said it was excessive draw downs by states in north India that caused the grid to collapse.

Ten northern Indian power transmission companies and eight electricity dispatch centers had been censured for exceeding their contracted electric withdrawals from Jan. 1 to March 25.

On July 10, the states of Uttar Pradesh, Rajasthan, Punjab and Haryana were ordered by the national Planning Commission, citing safety concerns, to cease overdrawals from the grid. As of July 30, the withdrawals were continuing, the commission said.

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Steve Geimann at sgeimann@bloomberg.net

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