Setback for thermal units as UP energy watchdog bans new PPAs till Dec 2022

Says UP Power Corp Ltd and state discoms had already contracted for 'sufficient' thermal power with coal-fired plants to meet projected demand till 2026-27

In a major setback to coal-fired thermal power plants, energy watchdog Uttar Pradesh Electricity Regulatory Authority (UPERC) has prohibited state power utilities from signing any long-term power purchase agreements (PPA) till December 2022.

In its order, the UPERC has observed UP Power Corporation Limited (UPPCL) and state distribution companies (discoms) had already contracted for “sufficient” thermal power with coal-fired power plants to meet projected demand till 2026-27.

The Commission said it would review the energy capacity, energy demand and availability status in December 2022 to reassess the need for any long term PPAs with coal based thermal power plant keeping in view 54 months’ gestation period required for such projects.

In the meantime, the UP Power Corporation Limited (UPPCL) and discoms have been given liberty to procure short-term seasonal peak power from energy exchanges, Centre or through bilateral banking arrangement with discoms in other states.

Meanwhile, a memorandum has been submitted to UP energy minister Shrikant Sharma for reviewing the ‘steeply’ priced PPAs signed with private power producers during previous regimes in UP.

“The minister has assured that the government is mulling to review all such PPAs for necessary action and to bring down electricity tariffs in the state,” UP Power Consumers Council chairman Avadhesh Kumar Verma told Business Standard here.

He underlined the Council had long been contending that several private thermal power plants, which had been set up in UP under the memorandum of understanding (MoU) route during previous state dispensations, were supplying costly power to state utilities, while the burden of steep tariff was ultimately being borne by domestic consumers.

Interestingly, a private thermal power plant is supplying electricity at as high as Rs 9.47 per unit rate even as average procurement cost from private plants comes to Rs 4.73 per unit. However, state government operated coal-fired units are supplying power at fraction of cost at Rs 3.56 per unit, while the central sector thermal power plants supply at even cheaper rates of Rs 3.46 per unit.

In view of costly power purchase from private sector power plants and its own inefficiency in cutting down pilferages, including thefts, lower bill realisation and T&D (transmission and distribution) losses, UPPCL projected its annual revenue requirement for 2019-20 of Rs 75,201 crore. Of this, more than Rs 54,000 crore would be incurred on purchasing power for supplying in the state.

The power procurement from private sector plants is estimated at Rs 20,518 during the fiscal.

Now, UPPCL has proposed hiking electricity tariffs by almost 25% for domestic consumers. Against the prevailing power tariff of Rs 4.90 per unit for the first 150 units of monthly consumption, the Corporation has proposed increase by more than 26% to Rs 6.20 per unit. However, it has to be cleared by the UPERC.