Delhi, Uttaranchal and Haryana are not just trading power anymore. To beef up their energy security, the northern states are creating buffers by entering into flexible power purchase contracts with other states and central utilities.

Hitherto, these states negotiated take-or-pay power purchase contracts. Under the new arrangement, they sell only the surplus power to other states.

This ensures they are able to take care of their seasonal as well as peak/off-peak demand variations. They are also able to meet any sudden demands due to unforeseen outages.

For instance, Delhi has managed to beat the summer peak this year by sourcing close to 4,000 megawatt of power, against around 3,300 megawatt tied up by it last year.

This has largely been possible due to "round-the-clock arrangements" with other states whereby if Delhi does not draw the full contracted amount of power from a generating source, it can trade the surplus power with neighbouring states like Haryana.

The fixed cost is borne by the state which is executing the contract, while the variable cost is shared by the state sourcing the surplus power. Both Delhi and Haryana are active players in the energy market, vying for extra power from Himachal Pradesh's hydel sources.

Delhi is a peculiar case. Here peak demand, both daily and seasonal, tends to be very high and hence the state needs to get into such arrangements to take care of the variations in demand.

During off-peak hours, Delhi sells 200-300 megawatt power to Madhya Pradesh, Haryana and other states at lower prices, state government officials said.

Similarly, Uttaranchal also shares some power with Delhi during summers. Delhi has agreed to provide some power to Uttaranchal during winters, when the hydel generation is affected due to freezing of water sources. Punjab is also in the market to buy power at off-peak hours, which it makes available to its farmers.