NEW DELHI: The government will soon kick off pilot auction of medium-term power purchase agreements for 2,500 mw of electricity, ending a six-year long spell of state governments restricting electricity procurement from power plants.
The power ministry has already finalised the bid documents, model power purchase agreement (PPA) and model power supply agreement.
Bid coordinator Power Finance Consulting Ltd (PFCL) will soon invite expressions of interest while PTC India is likely to be the power demand aggregator for state distribution companies, a senior government official said.
Experts, however, said the proposed auction could result in higher tariffs to the states, as the auctioned power purchase agreements for three years will be signed with zero escalation clauses.
Lack of PPAs is one of the key reasons for stress in the power sector besides other factors such as promoters’ equity crunch, no coal supply, and regulatory and contractual issues.
Over 1,00,000 mw power-generation capacity is under stress, as they do not have PPAs or coal or both. ET had on September 6, 2017 reported that the government is formulating a plan to revive stressed assets.
The proposed auction aims at helping idling power projects tie up medium-term contracts and service debt, the official said. At present, thermal power projects in the country are operating at about 62%. The move will help power projects with no or limited PPAs such as Adani’s Korba West in Chhattisgarh, Coastal Energen’s Mutiara in Tamil Nadu, Jaypee’s Bina plant in Madhya Pradesh, Abhijeet Power’s Mata Shri in Jharkhand, Lanco’s Vidharbha and Athena’s Bhavanapadu project.
A senior executive at power company based in the National Capital Region (NCR) hailed the move, but said the documents have been tilted in favour of the state distribution companies that will sign the three-year PPAs with no escalation clause. Also, the bidding documents comfort the discoms by almost waiving fixed cost payment when they do not offtake power from such power plants. The fixed cost for the 2,500-mw PPA auction has been kept at 1paisa per unit. Ashok Khurana, director general at Association of Power Producers, a national body of private power developers, said, “The bids may be on higher side as the risk apportionment is skewed in favour of distribution utilities.” The maximum capacity that can be contracted from one bidder is 600 mw.
“The tariff shall be fixed for the entire contract period and there shall be no escalation in the said tariff,” the bid document said. “For the purposes of bidding hereunder, the fixed charge of Rs. 0.01 (one paisa only)/ kWh and a variable charge comprising of the entire cost of production and supply of electricity from the power station up to the delivery point, including but not limited to the transmission charges and transmission losses, shall constitute the lump sum tariff for the power station,” it said.
The auction, however, mandates state distribution companies to pick up a minimum 55% capacity of electricity from the plants.
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