Currently, it is mandatory for discoms to pay PPA-equipped generation units the capacity charge, roughly 45% of the tariff, even if they do not have any use of the power.
Uttar Pradesh’s electricity regulator has directed the state electricity distribution companies (discoms) not to sign any new power purchase agreements (PPAs) with thermal power plants till December 2022. Keeping in mind the state’s failure to achieve its renewable purchase obligations (RPOs), the regulator instructed the discoms to signs new PPAs with renewable energy-based power sources, including hydro. The discoms were also suggested to invest in power storage technologies to meet the spurts of peak demand which lasts only for short durations.
The average power demand of the state is currently around 13,000 MW. During peak hours, demand rises to 22,000 MW. UP’s contracted PPA capacity is around 18,134 MW (14,161 MW thermal, 3,016 MW hydro and 958 MW renewable).
Barring the few hours of peak demand, most of the tied-up thermal power capacity remain underutilised. This is expected to cost the state Rs 4,797 crore as additional fixed charges in FY20. Currently, it is mandatory for discoms to pay PPA-equipped generation units the capacity charge, roughly 45% of the tariff, even if they do not have any use of the power. The additional cost might go up to Rs 10,750 crore in FY23, officials from the state electricity board informed, which translates into avoidable burden of Rs 0.44/unit. The state’s average power purchase cost (from non-renewable sources) in FY19 was Rs 3.73/unit, against the national average of Rs 3.60/unit.
“We should be mindful of the fact that UP is a low-income state and viability of power sector is directly related to the affordability of the electricity tariff,” the regulator said. Losses of UP discoms stood at Rs 2,576 crore at FY19-end. As on March, the state supplied less than 18 hours of power in a day in its rural areas.
By 2030, the state’s tied-up PPA cacapicty is seen to be 27,843 MW (11,999 MW thermal, 1,594 hydro and 14,250 MW of renewable). The discoms remain free to buy any form of power from the exchanges or make bilateral contracts for short-term arrangements.