Gencos may soon be able to sell unpaid power in open market
Power generating companies (gencos) may soon be allowed to sell power to a third party if the distribution company (discom) fails to make the payment. This will help reduce the tariff for consumers and also lessen the burden of regular payment on discoms.
The Ministry of Power has proposed this in draft amendments to the Electricity (Late Payment Surcharge) Rules, 2021. “The gencos are being given an option to sell power to a third party and recover their cost. To this extent the fixed-cost burden of the distribution licensee shall be reduced,” it said.
The amendment pertains to pending payments including late payment surcharge outstanding of discoms.
“After the expiry of seven months from the due date of payment, as prescribed in the power purchase agreement or the power supply agreement, the genco may sell power to any consumer or any other licensee or power exchanges,
for the period of such default, while retaining its claim on payment of fixed charges or capacity charges from the distribution licensee, after giving a notice of at least 15 days to the distribution licensee,” said the draft amendment.
The claim of the gencos on
the payment of discoms would be reconciled on an annual basis and would be limited to only under recovery of the fixed charges or capacity charges.
Tariffs of thermal power plants have two components — fixed cost, which is the capital cost, and variable cost, which is the fuel cost. Under long-term PPAS with gencos, discoms are obliged to pay the fixed cost even if they do not procure power during a certain period.
The ministry has proposed that gencos should follow the principle of ‘first in and first out’ for payment of bills by discoms. This, the ministry said, would boost the confidence of investors in power generation.
“All the bills payable by a discom to a genco shall be time-tagged with respect to the prescribed date of payment specified in the PPA, and the payment shall be made by the discom first against the oldest procurement of power and then to the second-oldest procurement and so on so as to ensure that payment against a procurement is not made unless and until all procurement older than it have been paid for,” said the draft amendment.
The ministry has circulated the draft amendments among stakeholders and will issue a final notice after receiving their comments.