In a bid to cut power purchase costs as per the ‘power for all’ agreement signed by the state government in April this year, the Uttar Pradesh Power Corporation (UPPCL) has decided to exit all power purchase agreements (PPAs) that are costly, and instead look for cheaper options available in the market. According to UPPCL sources, the government’s efforts are aimed at limiting power purchase cost to Rs 4 per unit.
In line with this move, UPPCL has already served exit notices on Bajaj Energy’s five generation plants of 90 MW each, which have been built in the vicinity of 5 of its existing sugar units. The units – Barkhera, Khambarkhera, Kundarkhi, Maqsoodpur and Utraula – were commissioned under Bajaj Energy in 2012 and are among the costliest power units supplying to UPPCL. Their average cost of power is approximately Rs 7/unit. As per the 10-day deemed notice period, the UPPCL would be exiting the PPAs from July 19.
Speaking to FE on condition of anonymity, a senior official of UPPCL said a standing committee on power procurement management has been formed, which has been mandated with the task of reducing power procurement costs by exploring all available options.
“Last year, there was a huge increase in our average power purchase cost. In 2015-16, the average power cost was Rs 3.86/unit. It went up to Rs 4.08 in 2016-17. In a bid to check this spiralling, we have been asked to bring it down by exploring all options and strategising ways of procuring cheap power. We have already started reviewing the merit order despatch (MOD) and started identifying costly power. The next step we have taken is to restrict or back down on expensive power, including that produced by our own state utilities. As a result, we are not scheduling any costly power,” he said.
Explaining the reasons behind serving notice to Bajaj Energy’s five units, he said at a time when cheaper power is available, it would be foolish to pay for costly power. “We have the option of buying from DEEP portal, through banking or even from the energy exchange. Our only target, as per the road map laid down by the ‘power for all’ agreement is to bring down the cost of power, and in doing so, we will exit all expensive power purchase agreements if there is a need for it,” the official said.
In fact, not only Bajaj’s five units, other costly power generating units such as NTPC’s gas-fired plants in Auraiya and Dadri as well as state utilities such as Harduaganj, Pankhi and Parichha are also in the line of fire. In fact, UPPCL is readying a letter to NTPC, requesting the generator to allow it to surrender its share of approximately 400 mw. When asked whether this would lead to litigation, as no generator would take it lying down, the official said UPPCL is ready to exercise all options.