Where’s The Exit? Dadri I matter shows discoms ending unviable PPAs may not be that simple even when the right of first refusal kicks in

Nonetheless, the 2 discoms needed to pay Rs 35 crore monthly as fastened cost, payable regardless of whether or not energy is scheduled or not.

By Somit Dasgupta

The Central Electrical energy Regulatory Fee (CERC) has allowed two of Delhi discoms to exit their energy buy agreements (PPAs) signed with NTPC for its Dadri I producing station. The discoms need to exit from the PPA (which has the blessing of the Delhi Electrical energy Regulatory Fee) for the reason that value was exceedingly excessive, at Rs 6.5 per unit. In an period of merit-order dispatch, the place a discom first buys energy from its least expensive PPA earlier than transferring up the stack, energy from Dadri I used to be not getting scheduled in any respect. Nonetheless, the 2 discoms needed to pay Rs 35 crore monthly as fastened cost, payable regardless of whether or not energy is scheduled or not. Fastened cost is primarily the price charged by the generator over and above the gasoline value.

Exiting from a PPA is a really contentious difficulty, and several other discoms up to now have tried to exit from costly PPAs, with out a lot success. Practically all discoms have signed extra PPAs than they really require, which signifies that they unnecessarily pay a set cost to numerous turbines whose energy they don’t schedule.

The CERC, whereas giving its determination, has relied on part 17(2) of its tariff laws (2019-24) which states that after completion of 25 years of the PPA, the discoms have the primary proper of refusal. In such a case, the generator is then free to promote its energy to whosoever it chooses. Why 25 years? Largely as a result of, on this interval, the generator will be fairly anticipated to have recovered its funding within the plant, together with depreciation and return on fairness. That being the case, there’s little logic why a discom ought to proceed to pay fastened cost, since energy buy value is totally reimbursable to the discom and is accounted for within the tariff that the buyer lastly pays. Consequently, it’s the shopper who beneficial properties if the cost of fastened cost is discontinued.

What makes Dadri I energy costly? Is it the age of the plant? No. Relatively, the problem is the placement of the plant. Mills positioned far-off from the coal mines incur a big value on coal transportation; this ensures that they don’t get a schedule underneath the merit-order dispatch. This explains why the Delhi discoms don’t need energy from Dadri I, however need it from Rihand and Singrauli vegetation (additionally NTPC’s) which are even older however located close to coal mines.

Pertinent to level out, there are equally positioned vegetation as Dadri I. These are the fuel stations, Anta and Auriya (additionally NTPC’s), and should not getting a schedule due to excessive variable value. However fastened cost is being paid by the discoms. In truth, Anta and Auriya are even older than Dadri I. All gas-based vegetation in India are working at a mean capability utilisation of 22-25%, resulting from non-availability of home fuel—imported fuel just isn’t economically viable. Why the Delhi discoms haven’t moved comparable petitions for Anta and Auraiya as effectively just isn’t recognized, however, in all chance, that is solely a matter of time.

The CERC determination, although, just isn’t the top of the story. As already talked about in its order, the discoms must strategy the Union ministry of energy to get their share from Dadri I de-allocated. By the way, the nationwide load dispatcher had refused to cease allocating Dadri I energy to the Delhi discoms till the ministry points recent orders. The ministry had itself issued pointers on the March 22 that the discoms can exit the PPAs after 25 years, in the event that they so need; however, this was adopted by a clarification on July 5, that the discoms have to surrender the ‘whole’ share. The Delhi discoms, in fact, need to give up their ‘whole’ share. It will be fascinating to see how rapidly the ministry acts by itself pointers. NTPC can also select to go on enchantment earlier than the Appellate Tribunal for Electrical energy (APTEL) or the courts. Shoppers in Delhi should look forward to someday earlier than they’ll have a good time.

The writer is Senior visiting fellow, Icrier, and former member, CEA