New Delhi: To improve resource adequacy in the power sector, the Ministry of Power has decided to bundle power from Central Generating Stations (CGS) of PSUs along with gas-based power after the expiry of their Power Purchase Agreements (PPAs). In an official order dated September 12, the Power Ministry said, “Government of India has decided that the Central Generating Stations (CGSs) of a Central Public Sector Undertaking (CPSU) whose PPAs have expired will be brought together in a pool, bundled with gas-based power and sold to whosoever wants to buy.” The government said that the rate of power will be fixed fairly and transparently and will be equal for every buyer from the pool.
The government wants to create a single window system through which states and discoms will be able to submit their willingness for power allocation within 15 days of the formation of the common pool. In the future, all generating stations whose PPA tenures have expired would be added to the pool. The tenure of most PPAs signed in the power sector used to be 25 years as that was supposed to be the average life span of a thermal power station. However, many thermal units in India and the world have been operating efficiently beyond 25 years. The government is also trying to lay the groundwork for a market-based economic despatch, for which power tied up with PPAs will have to be freed up.
While observing that both power generating companies (GENCOs) and distribution companies (DISCOMs) have equal rights to decide the next course of action after the expiry of the PPA, the government said that both the entities are free to decide whether they want to enter into another agreement with each other for the sale/purchase of power or sell the power on the exchange or bilaterally to any other entity. DISCOMs, too, are free to buy power from any other entity or the exchange after the expiry of the PPA, said the Power Ministry.
“The Power Purchase Agreement is a contract entered into by two parties, by the Generator and the Buyer, and when the Power Purchase Agreement expires, both the parties are free from the obligations of supplying or purchasing power from each other,” the order said.
The Power Ministry said that it had earlier enables DISCOMs to continue drawing power after the expiry of the tenure of the PPA through orders issued in March 2021 and July 2021. However, it was noticed that DISCOMs stopped drawing power from plants where costs were high while continuing to draw power from plants where cost of electricity was lower. This situation left GENCOs with a portfolio of costlier assets as cheaper assets were utilised entirely by DISCOMs. While noting that both the parties involved in a power purchase agreement have equal rights, the government has announced the new common pool scheme and has said that it will supersede all previous arrangements mandated earlier in situations where PPAs have expired.
