Government plans major change in power purchase norms

7-aug-2017

The government is planning a major change in the power purchase norms to help stressed plants get coal supplies and start generation as the revised sales pact will make it more attractive for distribution companies to buy electricity from them.

Norms are likely to be tweaked to remove contractual requirement for the buyer to pay a fixed cost to the plant even if no power is purchased.

This is expected to encourage distribution companies to float tenders for electricity supply and sign new PPAs, which in turn will help the stranded power stations get fuel supply from Coal India.

In a meeting called by the Union power ministry last Thursday, it was decided to constitute a committee to look into the prospects of power plant developers voluntarily waiving off fixed costs for state dicsoms that sign PPAs with stressed power plants.

The proposal, however, will mandate the state distribution companies to offtake a minimum capacity of electricity from the plants, a senior government official said.

“In a meeting on stressed assets, it was decided to study a mechanism to exempt discoms from paying fixed costs in case they do not offtake the contracted capacity. This is aimed at encouraging states to issue tenders for PPAs,” a senior government official said.

About 14,000 mw plants do not have power supply tie-ups, which are mandatory for procuring coal supply from CIL.

There seems merit in the proposal, but all stakeholders need to boost transparency in the policy challenged power sector.

The plan to have stressed assets forgoing fixed charges, so as to rev up dispatch, would amount to labelling them as merchant plants. The period of thus suspending PPAs need to be clear-cut and time-bound. The discoms, meanwhile, need to proactively shore up revenue collections and realisations. They need to be mandated to publish quarterly results.

Source-ET