The Union power ministry has allowed BSES Delhi discoms to exit power purchase agreement with NTPC’s Dadri-I unit, in a first of its kind move that is likely to trigger many such requests. In a clarification to its March notification, the power ministry on Tuesday said power distribution companies can exit entire allocation from a particular project after completion of 25 years. ”In case of bulk power supply agreement also, the state/discoms may relinquish entire allocated power from such projects which have completed 25 years since commissioning of the project,” the clarification said.
Reliance Infrastructure-led BSES said the move will allow BSES discoms to source cheaper and green power for consumers of Delhi. “MoP clarification endorses BSES stand to exit from costly 25-year old Power Purchase Agreements. MoP circular reiterates CERC order on Dadri 1 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,” a company spokesperson said.
The clarification comes after the power industry regulator allowed BSES Delhi distribution companies – BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Ltd (BYPL) – to exit the PPA. The Central Electricity Regulatory Commission (CERC) had asked the Delhi discoms to approach the Union power ministry for relinquishment of their allocations. BRPL and BYPL had stopped scheduling power from Dadri -I plant of NTPC in November 2020, upon completion of the plant’s 25 years of operation and had sought exit from Dadri-I plant.
Under power ministry guidelines, discoms have the right to either continue or exit a power purchase agreement (PPA) after completion of 25 years from commercial operation date (COD). NTPC had, however, denied exit to BSES discoms saying there is no specific clause in the PPA. The discoms approached CERC on this issue. “We have already noted that Dadri-I generating station has completed 25 years on 30.11.2020 from the date of commercial operation,” CERC said in its order issued on Thursday, and allowed the discoms to exercise the first right of refusal as per provisions of Regulation 17(2) of CERC Tariff Regulations, 2019. The order could lead to similar pleas from other discoms looking to exit high-cost PPAs, industry experts said. There are about 280 thermal power plants with 44,000-mw capacity that have completed 25 years, they said.
The relinquishment requests would be considered after the discoms clear all pending dues to the power plants. Power distribution companies in Delhi have been seeking to surrender PPAs with state and Centre-run plants citing high costs. The Union power ministry guidelines issued in March had allowed discoms to relinquish PPAs with plants that have completed 25 years and allowed generators to sell electricity in any mode. Central generating stations, whose power gets relinquished by states, would be free to sell power through short- and medium-term contracts, in the power exchanges or reallocate the power to willing buyers. Old PPAs consist mostly of those between discoms and power plants of NTPC, NLC India, Damodar Valley Corp and state generation companies, industry insiders said.
The ministry guidelines are expected to pave way for surrender of completed contracts with state power plants too, they said. Earlier there was a condition on discoms of exit from all the PPAs in a basket. The ministry has now permitted an option to exit from the PPAs one by one.
A senior official in one of the distribution companies said the vintage PPAs had exit condition of 25 years or useful life of the project, whichever is later. States having such long term-tie ups with central stations nearing completion of tenure can also opt to relinquish the allocated power.