Govt may invoke emergency powers to let power producers step out of PPAs
The government would allow these plants to sell electricity on the power exchanges if the states they have PPAs with do not buy costlier electricity generated by them, people aware of the deliberations told ET. The proposed mandate will ensure these projects operate and sell to distribution companies under their existing contracts or sell on power exchanges if power retailers refuse offtake due to higher costs.
Sarita C Singh
May 24, 2022, 09:47 IST
New Delhi: The government could invoke its emergency powers to make 40 GW domestic coal-based plants continue to generate power when they start blending imported coal even though their power purchase agreements (PPA) do not allow higher fuel costs to be passed on to the buyer.
The government would allow these plants to sell electricity on the power exchanges if the states they have PPAs with do not buy costlier electricity generated by them, people aware of the deliberations told ET.
In April, the union power ministry had asked all power plants using domestic coal to import 10% of their fuel requirement and blend it with local coal.
The costlier imported coal would raise the cost of electricity generation that under existing agreements cannot be passed on to the buyer.
The proposed mandate will ensure these projects operate and sell to distribution companies under their existing contracts or sell on power exchanges if power retailers refuse offtake due to higher costs, they said.
The power ministry is working on a methodology to pass-through the higher cost of blending imported coal to the consumers. The directive to these plants could be issued in the next 2-3 days.
Section 11 of the Electricity Act provides that the government may, in extraordinary circumstances, ask a generating company to operate and maintain any station in accordance with its directions.
"The Centre considers PPAs as legally binding documents, but in the wake of the emerging national crisis, Section 11 has to be used to prevent mass blackouts and (deflect a) threat to the national grid," a senior government official said.
However, legal experts are not convinced about the Centre's jurisdiction in the case of power projects selling to only one state. Such projects fall under the purview of states and their respective electricity regulatory commissions.
Tariffs for these 40-gw coal-based plants across the country were derived through tariff based on domestic coal through competitive bidding under section 63 of the Electricity Act.
Power projects of central PSUs and plants with multi-state PPAs fall under the Centre's domain and are overseen by the Central Electricity Regulatory Commission (CERC).
The Centre is relying on coal imports to build stocks at power stations amid high demand projections.
Last Wednesday, the Centre invoked an emergency provision to direct CERC to allow power plants to use coal blended with up to 30% imported content until March next year without having to seek the consent of buyer states.
The directive said stocks at generating stations are depleting at a worrisome rate due to the mismatch in demand and supply of domestic coal.
On May 5, the power ministry invoked Section 11 to mandate 13 imported coal-based power projects to operate and sell to discoms or on the power exchanges. A panel appointed by the order also decided on benchmark tariffs for six of these projects.
power ministry
india energy crisis
coal import
cerc