Discoms to pay full tariff during non-supply period to renewable gencos: MNRE

Power distribution companies would have to pay the agreed full tariff to renewable energy producers during the period of non-supply of electricity, the government said on Wednesday.

Power discoms pay fixed charges or infrastructure cost to electricity generation companies during the non-supply period under the power purchase agreements (PPA). They do not pay the cost of fuel for the period.

The New and Renewable Energy Ministry noted that there is no fuel cost for renewables, the fixed cost in case of renewable would be agreed tariff during the non-supply period, which includes installation, operation and maintenance cost.

Power distribution utilities would pay the agreed full tariff during the period of non-supply of electricity to generating companies running solar, wind and small hydro power projects (up to 25 MW), the ministry said in a statement.

The clarification has come ahead of the roll-out of payment security mechanism from Thursday.

Under this, the discoms would have to open sufficient letters of credit for getting power supply from generating firms.

The mechanism provides that there would be no power supply in the absence of sufficient letters of credit.

The power ministry has made it mandatory for discoms to open and maintain an adequate letter of credit (LC) as payment security mechanism under power purchase agreements (PPAs) for buying electricity from generating firms from August 1, 2019.

Independent power producers had demanded a payment security mechanism to reduce stress in the sector.