In a major relief for power distribution companies, the government has now given them the freedom to terminate or continue drawing power from a project that has completed 25 years of operations.
In a letter to the state governments and the heads of central generating stations (CGS), the Ministry of Power said that as per the guidelines of power purchase agreements (PPAs), discoms are eligible to terminate the entire allocated power from a power project that has completed 25 years of operations since its commissioning.
It has also said that discoms, if so they so wish, may also continue to draw power from such old power stations, exercising the first right of refusal available to them under the terms of long-term PPAs.
The changes are path-breaking for the power sector as they will help discoms terminate an old PPA that has not remained economical in terms of power tariff. Also, termination of PPAs may allow shutting down operations of old and polluting power stations.
The Power Ministry has said that while flexibility will be given to discoms to terminate old PPAs, such a move should be complete and not done in parts. So, if there is a PPA for bulk purchase from a power station, the entire quantity would have to be relinquished by the discoms after 25 years and not just a portion of it.
If the PPAs are extended beyond 25 years, they cannot go beyond a five-year period. Also, power generating stations losing old PPAs would be free to sell such relinquished power in the open market through exchanges, tie-ups with other buyers desiring to go for long term or medium term PPAs or get the power reallocated to the willing buyers.
Last week, in a case pertaining to BSES Yamuna Power Limited, the Central Electricity Regulatory Commission (CERC) had ordered the BSES discom to exit the PPA with NTPC's Dadri-I power generating station.
"We are of the view that in terms of the PPA and the SPPA and the fact that the Dadri-I generating station having completed 25 years on 30.11.2020, the petitioners are eligible to exercise the first right of refusal as per the provisions of Regulation 17(2) of the 2019 Tariff Regulations," the order had said.
"MoP clarification endorses BSES stand to exit from costly 25 year old Power Purchase Agreements. MoP circular reiterates CERC order on Dadri1 and will be hugely beneficial to the 45 lakh BSES consumers of Delhi as it will help reduce the burden of fixed costs as well. It will allow BSES discoms to source cheaper and green power for consumers of Delhi," a BSES spokesperson said.
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