In its first move to allow Punjab State Power Corporation Limited to terminate an agreement with producers having higher generation cost, the state regulator has permitted PSPCL to relinquish allocated power from National Thermal Power Corporation (NTPC).

This will save 115 crore annually that the PSPCL was paying to NTPC generating stations at Anta, Auraiya and Dadri as fixed capacity charges without even drawing power. The PSPCL had signed the power purchase agreement (PPA) in 1997 for these plants and was getting 49MW from Anta, 83MW from Auraiya and 132MW from Dadri, all gas-based power plants of NTPC.

Barring Dadri, the other projects have completed the useful life of 25 years. The PPA with these plants had a two-part tariff: Fixed cost and variable cost. As the variable cost of power, which depends upon the prices of gas from these plants was higher, the PSPCL was not drawing power from them. The power from these plants cost between 8 and 14 a unit, depending upon the cost of gas prices.

Higher cost of power purchase

Due to additional 3,920MW from independent power producers (IPPs) since 2013-14 and electricity from external sources under long-term PPAs, Punjab had surplus power. Since the PSPCL was not scheduling its allocated share from the gas-based stations, Punjab urged the Union power ministry to reallocate its share to other states.

The PSPCL surrendered more than 90% of its share in 2018-19 and 88% in 2019-20 but is still paying fixed charges to Anta, Auraiya and Dadri power stations. The PSPCL paid 128.99 crore in 2018-19 and 115.11 crore in 2019-20 as fixed charges against power surrendered from these gas-based power plants.

It said that continued allocation of power from the generating stations is a financial burden and is leading to higher cost of power purchase that is passed on to consumers and translates in tariff hike.

NTPC opposes move to cancel PPA

The PSPCL sought permission to relinquish its allocated share from the three stations of NTPC, which opposed the move. The NTPC contended that the PSPCL is power surplus, but according to projections it needs more power as it is going to be deficit in the peak season in 2023. Cancelling the PPA will lead to higher power cost in future for PSPCL, it said.

The Punjab State Electricity Regulatory Commission (PSERC) said that it has noted PSPCL’s submission that the variable cost of Anta, Auraiya and Dadri gas power stations is among the highest. “The allocation of power from these generating stations, which have high variable costs, is causing undue financial burden on the PSPCL and is leading to higher cost of purchase of power which is against the interest of consumers in Punjab,” the PSERC said in its decision.

Decision to benefit power consumers

Citing provisions of the power ministry to review the PPA after useful life, the PSERC said since the ministry has allowed discoms to surrender entire power from a project, the PSPCL is allowed to relinquish power from these projects.

PSPCL chairman A Venu Prasad said this is a welcome decision and it will save around 115 crore for the PSPCL, which will reduce power purchase cost and ultimately benefit consumers.

Source: 11 August, 2021, Hindustan Times