The Power Ministry has withdrawn the guidelines that allowed Discoms to continue drawing power from a Genco even after the expiry of the term of their Power Purchase Agreement (PPA).

Now, all the Central generating stations (CGSs) of a Central public sector undertaking (CPSU) whose PPA has expired will be brought together in a central common pool bundled with gas-based power and will be sold to States who want to buy electricity at a uniform tariff.

Common pool

In April this year, the Ministry announced creation of a common pool of efficiently-operated coal and gas-based power plants operated by CPSUs, which have completed 25 years of operations and whose PPAs have expired.

In March and July 2021, the Ministry had issued guidelines and clarifications, enabling Discoms to continue drawing power even after completion of their PPAs.

“Now, the March 2021 order has been superseded by the April 2023 order and all the CPSU stations with no PPAs will pool their power in this common pool. Procuring power from here will be through a uniform energy charge based on station-wise weighted average pooled monthly energy charge rate (ECR) and final implemented schedule,” a senior government official explained.

Welcoming the creation of a common pool, Nangia Andersen Partner (government and public sector power advisory) Arindam Ghosh said it is a win-win situation for all including Discoms, Gencos and grid operators.

“The common pool is going to provide appropriate bundled avenues to power plants which have completed their useful life and gas power plants, which have been reeling under losses and low PLF due to either unavailability of gas or high cost. In due course, post this system reaches maturity, it is recommended that vitality of the central pool may also be extended to power system operators and letting capacities be offered under ancillary services for balancing the variable RE generation on a daily basis,” he added.

Resource utilisation

The Power Ministry observed that after the March 2021 order some Discoms stopped drawing power from those plants whose costs were higher while continuing to draw power from cheaper plants.

The Gencos protested this inequitable arrangement, which has led to a situation where a Genco has been left with a portfolio of costlier assets while the benefit of cheaper assets is entirely utilised by the Discom at the cost of the Genco, the Ministry concluded.

The matter has been carefully examined and the legal position is that both parties under the agreement should have equal rights on the expiry of a PPA. Both the generator and procurer have equal rights to decide the next course of action. Any unilateral choice with any party is not justifiable. PPA is a contract entered into by two parties, and when it expires both parties are free from the obligation of supplying or purchasing power from each other, it said.

After careful consideration, it was decided that the legal position should be strictly enforced, wherein on expiry of the PPA both parties are free to decide their future course of action.

“The government has decided that CGS of a CPSU whose PPA has expired will be brought together in a pool bundled with gas-based power and will be sold to whosoever wants to buy. The rate of power will be fixed fairly and transparently and will be equal for any buyer in the pool,” the Ministry said.