Govt's PPA exit guidelines stuck amid tussle between generators and discoms

Once relinquished, generators and discoms can sell and buy power under other arrangements

The Union power ministry’s proposal to introduce flexibility in power purchase after the completion of 25 years is stuck because of differences between generators and distribution companies (discoms).
 
The ministry had come up with a draft proposal in December, but no decision has been taken so far, though there are regulatory guidelines for this.
 
According to a letter written by the Union ministry of power to state discoms and generating stations owned by the central public sector enterprises, there were seven proposed principles on which power relinquishment or continuation would work after the completion of 25-year PPAs. These included relinquishment of entire centrally allocated power, except where it is bundled with solar power. Once relinquished, both generators and discoms could sell and buy power under other arrangements. The first right of taking power beyond the contractual period, however, was to rest with the existing buyer.
 
The plan was devised as states had written to the Union government with a request to surrender the allocated share of power from the central generating stations. The states were asked to send in their responses in 21 days.
 
Since these PPAs and the central allocation of power were devised in a power deficit scenario, many states and discoms wanted to exit these contracts on their expiry. Punjab, Andhra Pradesh, Odisha, and Delhi had written to the Centre conveying their willingness to surrender the power allocated to them. In the case of Delhi, the issue has landed in the court. Almost all the states have been purchasing some part of their power from NTPC plants for over 25 years.

 
Most of these generation plants were set up by the Union government-owned NTPC as part of the regulated tariff mechanism under the Electricity Act. The central government allocated power from these plants under guidelines issued in 2000. In some cases, the states entered into bilateral agreements with NTPC for purchasing power. According to the power ministry letter, such arrangements were more appropriate during a power deficit scenario since the Centre wanted every state to get a share. When there was a power surplus, procurement too shifted to tariff-based bidding.
 
The Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019, allows generators to build cost of renovation and maintenance into the tariffs, which means discoms could end up paying more after the expiry of the initial contract period, said an industry insider. Also, states that are purchasing costlier power from the central generating unit could purchase power through other routes like short-terms contracts, procurement in open market, bilateral transactions, etc.
 
“Such a proposition would allow discoms to substitute their costly power through alternate sources, thereby, presenting scope to lower their overall power purchase cost,” said the letter. This, the power ministry felt, could help states that face power deficits.