Generating cos can’t pull plug over non-payment

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SummaryIn a move that exposed a key regulatory lacuna in the power sector, the Power Grid Corporation of India, the central transmission utility, stymied the attempt by some generating companies, including NTPC and Tata Power, to snap supplies to discoms failing to honour the payment security mechanism under the power purchase agreements.

In a move that exposed a key regulatory lacuna in the power sector, the Power Grid Corporation of India (PGCIL), the central transmission utility, stymied the attempt by some generating companies, including NTPC and Tata Power, to snap supplies to discoms failing to honour the payment security mechanism under the power purchase agreements (PPAs). According to official sources, the regional load dispatch centres (LDCs) under PGCIL have informed the generating companies that until and unless the buyer refuses to lift power, it would not disconnect supplies to the non-compliant discoms.

This has put power producers in an unenviable position and one of them, a source privy to the matter said, has approached the judiciary for remedy, although the company concerned did not confirm this to FE. On its part, the Central Electricity Regulatory Commission said the matter was yet to reach it, while the power ministry has refused to intervene. “The power ministry is not party to the PPA,” Ashok Lavasa, additional secretary in the ministry, told FE.

It is not possible for the generators to cut production and refuse to give power to errant discoms because under the relevant regulations, even if they reduce generation, the LDC would proportionately distribute power to all the allocatees.

The problem is that while the PPA does have provisions for disconnecting supply to an existing allocatee and making third-party electricity sales in the event of payment default, it does not have any explicit provision to force LDCs to disconnect power supplies even in case the generator wants to snap supplies.

Apart from NTPC and Tata Power, public sector Damodar Valley Corporation (DVC) and and Lanco have of late put pressure on discoms delaying payments. While Lanco has stopped generation at its plant in Udupi, Karnataka, DVC is planning to issue a notice to Delhi discoms BSES for payment delays.

As reported earlier, Tata Power, which bid aggressively for the Mundra ultra mega power project on the assurance of a guaranteed payment security mechanism, has discovered to its surprise that the PPA signed for the project is not as effective as it was advertised. The private developer has failed to get the LDC concerned to act on its request to snap electricity supplies to Rajasthan government-owned power distribution companies. The LDC, to Tata Power's dismay, asked for the consent of the discoms, a move that experts say could render the entire payment security mechanism in the PPA inoperable.

The PPA

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