States stop green power purchase, stall payment
Following the lockdown and a fall in electricity demand, several states are now curtailing renewable power purchase and have also issued notice on non-payment to renewable power generators. These states have invoked the force majeure clause in their power purchase agreements with renewable projects to nix power supply and payment.
Following the lockdown and fall in electricity demand, several states are now curtailing renewable power purchase and have also issued notice of nonpayment to renewable power generators. These states have invoked the force majeure clause in their power purchase agreements (PPAS) with renewable projects to nix power supply and payment.
The Ministry of New and Renewable Energy in a notice on Wednesday asked the states to comply with the must-run status of renewable energy. “The status of must-run should remain unchanged during the period of lockdown.”
While Punjab has told renewable power producers to run the units at their own cost and risk, Uttar Pradesh, Andhra Pradesh and Madhya Pradesh have refused payment and informed them of curtailing renewable power.
Renewable power — including solar, wind, small hydro and biomass — comes under ‘must-run status’, that is, it cannot be stalled or shut under any circumstances.
Punjab, however, has issued notice to several renewable power producers, which supply to the state, that it will curtail electricity power purchase as well as generation. The state, citing the force majeure clause, asked power producers that if they inject any power into the state’s grid, “it will be at their own risk and cost”.
Force majeure in the supply or project commissioning clause pertains to events and circumstances that are beyond the control of humans. The clause, however, does not excuse a party’s non-performance entirely, but only suspends it for the duration of the clause.
Punjab State Power Corporation (PSPCL), in its notice to power pro
ducers on Monday, said, “You are hereby intimated that as per force majeure clause, PSPCL is prevented from performing its obligation of purchasing and accepting energy from your generating company facility on account of force majeure event of epidemic (Covid-19) with immediate effect till this epidemic lasts. During this period, if any power is injected into the PSPCL/PSTCL system, then the same will be at your risk and cost.”
This paper recently reported that during March the demand for power went down 31 per cent, while there was a 68 per cent increase in capacity which has been backed down. Last week, Uttar Pradesh was the first state to refuse payment to solar power projects, citing force majeure and inability to pay in the wake of reduced revenue. The plea was declined by the Solar Energy Corporation of India (SECI).
SECI, which comes under the ministry of new and renewable energy and supplies renewable power to UP, said inability to pay bills due to “insufficiency of finances or funds” cannot be claimed as force majeure. Leading renewable energy players such as Azure Power, Renew Power, Softbank Energy and Hero Future Energies supply power to UP.
Madhya Pradesh, which is India’s leading renewable power generating state, also issued notice to all renewable power generators that it will be unable to meet its obligations under the PPA due to “unprecedented fall in revenues from electricity bill collection.”
The state also said it cannot determine the time period for which it will default. It also invoked the force majeure clause.
Several groups of renewable power producers have now requested the Centre to clarify to the states on scheduling of renewable power and payment.
The Union ministry of power last week allowed power distribution companies (discoms) to defer payments to power generators (gencos) and transmission companies (transcos) in the wake of delayed payments by electricity consumers.
The ministry has asked the Central electricity regulatory Commission (CERC) to provide three months moratorium to discoms for paying gencos and transcos. However, the CERC is yet to issue any notice.
At the same time, developers have cited that the moratorium has not been given on payment by discoms to gencos. Rather, it is on the late payment surcharge in case of delayed payment by the discom.
In a letter to the CERC, the power ministry has asked it to specify the reduced rate of late payment surcharge for payment that become delayed beyond a period of 45 days.
It also allowed discoms to claim relief against its obligations to pay late payment surcharge to gencos. Business Standard has reviewed the letter issued on March 28.
Renewable energy (RE) power producers, however, in their letter to the Centre, asked the government to issue a clarification against its earlier notice that there is no moratorium on payments to be made by discoms to the generators and “thereby should pay the RE players, considering their must-run status.”