Most Mumbaikars are prepared for October heat, but this year, the temperatures are not in the 35-36℃ range as usual. They’re hitting close to 39℃ — keeping ACs running on full capacity at many homes.

Reported temperatures are also higher in the North as well as the South. This is undoing the economics of power purchase across India – pushing power distributors to arrange more power quickly and, in most cases, expensively.

The culprit is the El Niño weather phenomenon, which has affected power consumption patterns across various levers. The weather pattern, which involves warming of ocean surface temperatures, has gained ground since the monsoon months – causing erratic rainfall patterns and leading to a 13% monsoon deficit for the year. But El Niño is only gaining ground and might even affect winter as well.

“Temperature anomalies are being observed in the Pacific Ocean where subsurface temperatures between 50 to 150 meters are 8 degrees above normal. 8℃ above mean and ocean surfaces are 3℃ above mean. It will take time for these ocean waters to cool off. All these indicate a rare occurrence of an extremely strong El Niño coming up during October to December,” Air Vice Marshall GP Sharma, who is the president of meteorology & climate change at Skymet Weather Services, told The Core.

What Is Powering The Demand?

Both monsoon deficit and increased power demand are impacting state distribution companies' math and predictions.

“There was a huge surge in demand from the agricultural sector. Their requirement went up dramatically by 2,000-3,000 megawatts (MW), which created a power shortage in some pockets as farmers started using tubewells and motor resources,” says an official from Maharashtra State Electricity Distribution Company (MSEDCL).

This sharp rise in peak demand is a nationwide occurrence. As per Centre for Research on Energy and Clean Air (CERA)’s Q2 update, national peak demand reached 270 gigawatts (GW) in Q2 FY27, going up by 18% or up 40 GW from last year’s 230 GW. Peak demand growth had been flat last year as it was the La Nina year, but this year has already surged past the averages.

At the state level, Uttar Pradesh and Maharashtra recorded the highest peak demand in Q2 2026–27 at 27 GW, followed by Gujarat (23 GW), Tamil Nadu (20 GW), and Karnataka (16 GW), as per CERA.

Apart from peak demand — which is the highest instant rate of consumption at a given point – overall power demand has also gone up.

“Overall power demand has grown by around 9.5% YoY during April-August 2026, driven by a combination of a favourable base effect, rainfall deficit conditions associated with El Niño, higher agricultural power consumption, and elevated temperatures that have sustained cooling demand,” Jatin Arya, director & rating head of infrastructure ratings at CareEdge tells The Core.

Historically, power demand during the October-December grew at a compounded annual growth rate (CAGR) of around 3.3% between FY19 and FY26. As they are the winter months, it’s slightly lower than annual demand growth at around 4.3% CAGR.

“Considering the strong demand momentum witnessed so far this year, coupled with the possibility of continued weather-related impacts from El Niño, demand growth in the current quarter is expected to remain healthy and above historical averages through the October-December quarter — in the 5-6% range YoY,” Arya adds.

The Spot-Side Story

Most distribution companies have been banking on the power exchanges to fill this gap.

As of August, Indian Energy Exchange (IEX) recorded the highest ever monthly electricity traded volume of 13,938 million units (MUs) in August 2026, an increase of 20.2% YoY, as a monthly bulletin by the exchange.

The type of buying which saw the highest growth as indicated in the table below, is the Day-Ahead Contingency and Term-Ahead Market (TAM) including HP-TAM, comprising contingency, daily & weekly and monthly contracts up to three months. It grew at a whopping 111% – showing that distribution companies are preparing for it months in advance.

“Buying activity in the Month-Ahead and Three-Month-Ahead markets has been higher than during the corresponding period last year. The Southern and Western regions have accounted for a major share of the buying activity. The total volume of electricity traded across power exchanges in September 2026 was higher than the volume recorded in September 2025, indicating an increase in trading activity on a year-on-year basis,” Power Exchange of India Limited (PXIL) said in response to The Core’s queries.

State Electricity Boards or SEBs generally meet their power requirements through a combination of long-term power purchase agreements (PPAs), short-term contracts, and purchases from power exchanges. The share of long term/medium term power purchase is typically around 86%-87% and the rest of the requirement is filled by purchases from exchanges or bilateral contracts.

But the unexpected spike has left many consumers power distributors dependent on the spot market – which also pushed up the prices. “The average market clearing price in the Day-Ahead Market stood at Rs 4.88/unit, a 22% YoY increase. The average market clearing price in the Real-Time Market stood at Rs 4.41/unit during August ’26, an increase of 30.4% YoY, as per the IEX bulletin. The demand is so steep that as of August, buy bids are more than the sell bids.

“We are trying to purchase power in the month-ahead market and are also tapping every other resource. It will increase the cost of purchase but we have no other option. There has been no load shedding as of now but even if there is, it would be easily managed,” says the source from MSEDCL.

State power distribution companies’ pass through of increased costs is a complicated and delayed process. In a few cases, it takes years if not months to aggregate the increased costs and raise the unit prices for the end consumers.

In FY25, all of the country’s discoms and power departments collectively posted a positive Profit After Tax (PAT) of ₹2,701 crore against an FY24 loss of ₹25,553 crore as per a PIB release in January this year. Most of the state discoms have accumulated historic debt levels in lieu of the losses accumulated over the years. As of FY25, Uttar Pradesh, Tamil Nadu and Rajasthan have the highest accumulated debt, after tracking deficits for the financial year.

The El Nino intensity, consumption and costs however might undo the delicate profitability of discoms. Sources from discoms however insist losses notwithstanding, their aim is to ensure power supply is uninterrupted.

Yet, power distributors are preparing for only the short term, while El Nino impact might be more long-term. “The effects of El Nino could carry on till Spring of next year, and might affect the early monsoon next year too,” says Sharma.

SEBs however are not preparing for its long haul effects. “We cannot prepare for such a long term as these weather conditions are unpredictable,” says a source from a power distributor based in Karnataka who refuses to be quoted.

Captivating Captive Power Resources

The central government however is preparing for the long-term impact of El Nino. In the last week of September, the central government evoked emergency provisions of the Electricity Act, and ordered captive power plants – run by industries for their own consumption – to keep operating at maximum capacity.

The order covers 112 power plants which are above 50 MW capacity and covers top business houses like Vedanta, Tata Steel, Hindalco Industries, JSW Steel and more. These power plants were ordered to sell power to the exchanges. Industry experts however feel that state electricity boards and power consumers will also individually approach captive power plants across the state for swap power deals.

“What happens in captive power is that power is fed to the grid and the grid in turn supplies power back to the captive power plants if they’re in excess at a later date,” explains Lenka. These deals which can be done without money involved, can also go easy on the books.

El Nino Impacts Hydro Production

The supply side of the power sector – the generators are on overdrive too. All modes of power generation including thermal, wind, nuclear and even gas power plants (LNG supply worries notwithstanding) saw their plant load factors (PLFs) or capacity utilizations go up. Solar capacity utilization factor (CUF) was flat.

But hydro power is another story. El Nino led to lesser rainfall due to monsoon deficit, coupled with lower reservoir levels has impacted hydel power generation. The capacity utilization factor (CUF) of small hydro declined to 44% from 50% last year. Hydro PLF, which includes large hydro projects, went down to 50% from 61% last year, as per CERA data.

A large burden of the increased generation burden fell on coal which is where it’s much easier to switch on and off as per requirement. Thermal power output went up significantly by 9.2% in the five months of FY27, as per CareEdge. So much so that the coal stock buffers at power plants reduced materially due to lower rake availability, monsoon-related disruptions to coal production, and higher coal consumption amid elevated power demand.

The average coal inventory levels stood at around seven days as of September-end FY27, compared with 18 days and 14 days at the end of H1 in the last two years. “But we do not expect a widespread decline in thermal generation due to coal shortages. Domestic coal production is robust and supply-side interventions are helping maintain adequate fuel availability across most plants,” says Arya.

Going ahead too, a lot of the share of increased power generation is expected from coal power itself. While hydro will continue to suffer, the utilization of solar power is also unlikely to go up.

“Solar power generation is directly related to irradiation which comes from the Sun. The El Nino triggered heat won’t help in any way. Moreover, too much wind and light can impact solar power generation negatively. In the winter months, Sun will move away, and the output will be impacted,” says Pradeep Lenka, a power sector consultant and the former COO of ACWA Power International in Dubai, told The Core.

El Nino has a multi-pronged impact on the power sector — pushing generators to produce more, distributors to arrange more power – all to avoid the dreaded load shedding. Even if power cuts are avoided in most cities, the higher cost of power so procured might end up on the bills of consumers, later if not sooner.