DISCOMs Can Requisition Power from Common Pool After the Expiry of PPA

In April, the government issued a program for pooling of tariffs for projects not bound by PPAs


The Ministry of Power (MoP) has said distribution companies (DISCOMs) can procure power from the common pool after the expiry of the power purchase agreement (PPA), as per the provisions of the program issued by it in April.

In April, the Ministry issued a program for pooling tariffs for coal or gas-based thermal power plants whose PPAs have expired in the backdrop of increasing demand for electricity at a time when India is transitioning to non-fossil fuel sources. The program was meant to ensure the availability of adequate resources in the grid for peaking, balancing, flexing, and redistributing benefits such as reliability and cost-effectiveness among the beneficiaries.

The April program would supersede the earlier notifications issued by the government.

The Ministry issued notifications on March 22, 2021, and July 5, 2021, allowing DISCOMs to continue obtaining electricity even after their PPAs had expired. However, some DISCOMs ceased sourcing power from plants whose costs were high while still procuring electricity from cheaper facilities. This led to concerns from power generators, who found themselves burdened with pricier assets while DISCOMs reaped the benefits of cheaper ones at the expense of the generators.

After careful consideration, the government decided that when the PPA expires, both parties can enter into a new agreement to purchase and sell power or allow the generator to sell the power on the exchange or to another entity. DISCOMs will have the freedom to choose the source from which they buy power.

The government decided that the central generating stations whose PPAs have expired will be brought together in a pool, bundled with gas-based power, and sold to whosoever wants to buy. The rate of power will be fixed transparently and will be equal for every buyer from the pool.

The Central Electricity Regulatory Commission was directed to take necessary action to operationalize the program.

In 2021, the Ministry of Power had provided an option for DISCOMs to continue or exit from PPAs for projects that have completed 25 years of operation or the tenure specified in the PPA with the central generating stations.

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