Power Generators Can Exit Loss Making Contracts With States

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The government has given freedom to the central sector power producers such as NTPC, NHPC and SJVN to sell power relinquished by state discoms to new buyers under long or short term contracts or place the surplus power on exchanges for discovery of price in the day ahead, term ahead and real time markets.

The move is expected to provide new avenues to central generating stations (CGS) who could now find buyers with better paying capacity for power relinquished by state discoms that have often been found to delay payment to power generators.

Total dues owed by electricity distribution companies to power producers have risen sharply to reach closer to Rs 1.40 lakh crore now, reflecting deep stress in the sector.

In a set of guidelines on distribution of power after the termination of power purchase agreements (PPAs), the Power Ministry has said relinquished power (the capacity that comes out of the PPAs existing with state discoms) could be sold by CGS under various avenues including tie up with another buyer willing to go in for long term, medium term (up to 5 years) or short term PPAs through competitive bidding route. This power could also be sold through power exchanges and also reallocated to willing buyers.

However, the new guidelines, which have been framed after extensive discussions with the state governments and stakeholders, has accorded first right to refusal to state/discoms with which CGS had PPA earlier. Willing discoms have to be allocated desired quantity of power by generators even after the term of a PPA ends (about 25 years in most cases) on priority. Outside sale could only be done after an original PPA holders for the quantity of power gives a no objection certificate (NoC).

The guidelines further states that either party would have to give six months notice indicating their decision to exit from a PPA. This would mean that in cases where PPA is set to expire in near future, a six month advance notice will have to be given by the state or discoms and where a 25 year PPA has already expired, again state will have to give six months notice to CGS indicating their decision to exit.

In all cases of relinquishment of tied up power, regulatory approval would also be required to see whether the discoms forgoing its share of power is able to meet the energy needs of the state. Also, such proposals would go through only after state or discoms clear all past dues.

Any share of CGS, once relinquished by the state, will not be allowed to be taken back by the state under the same PPA conditions, the guideline states.

For nuclear power generating stations, the mechanism of relinquishment of power after the completion of the term of PPA will only be decided by the Department of Atomic Energy.

The new guideline is expected to bring more clarity on continuation tied up power and give flexibility to both state and CGS to undertake future contract based on economic principles and need.

Source: IANS

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