Maharashtra DISCOM Seeks Dismissal of PPA with Wind Generator over Lack of Funds

April 2, 2019


The Maharashtra Electricity Regulatory Commission (MERC) has asked the Maharashtra State Electricity Distribution Company Limited (MSEDCL) to pay the dues Rajlakshmi Minerals for the electricity supplied under their wind energy purchases agreement.

Rajlakshmi Minerals had commissioned a wind power project in Kolhapur district of Maharashtra and signed the agreement with MSEDCL on August 20, 2014. As per the agreement, MSEDCL was to make payments to Rajlakshmi Minerals for the purchase of electricity within 60 days from the receipt of the monthly energy bills. In the event of a delay, an interest rate of 1.25 percent per month was to be paid to the generator.

Rajlakshmi Minerals, in its petition, has complained that MSEDCL has not made any payment for the electricity consumed by it. Therefore, it decided to approach the Commission and consequently, the MERC issued an order on May 16, 2017, directing MSEDCL to make the payment along with the delay payment charges along with interest.

After the order, MSEDCL made selective payments only to those wind power producers who submitted an undertaking to waive the delayed payment charges. Rajlakshmi Minerals did not sign the undertaking and again approached the commission and filed a contempt petition.

Later, the state commission directed both the parties to reconcile the statement of account and submit a report within two weeks.

After that, Rajlakshmi Minerals and MSEDCL reconciled the accounts, and MSEDCL said that it would make the payment towards the delayed payment charges due until April 2017 and the principal amount outstanding as per the availability of funds. MSEDCL proceeded to make the payment of delayed payment charges in January 2018, and accordingly, the commission disposed of the contempt petition.

However, the proceeding only dealt with the invoices raised before May 2017 and not after. MSEDCL made a payment of ₹21.789 million (~$0.31 million) to Rajlakshmi Minerals on January 1, 2019. The payment was towards the electricity bills raised between May 2017 and September 2017. The payment was late by more than a year.

Rajlakshmi Minerals has now argued that the non-payment of dues has caused it many economic difficulties such as loan servicing and other payments.

MSEDCL in its reply said that it had submitted its payment plan to the commission for clearing the outstanding dues as on March 2018 by March 2019 and it is following the plan. The payment of   ₹21.789 million (~$0.31 million) to Rajlakshmi Minerals was made according to the payment plan submitted to the MERC, it argued.

It further added that the remaining payment for dues from October 2017 to March 2018 would be made as per the availability of funds. It has made a total payment of ₹15.24 billion (~$ 0.22 billion) for power generation up to September 2017. It has also paid around ₹29.65 billion (~$0.43 million) after the submission of the payment plan to the state commission (September 2018 to December 2018).

“From past many years in the state, agricultural consumers are not paying bills on time. Similarly, the arrears of government departments have accumulated for the supply of electricity to public water works and street light consumers category. More than 85 percent of arrears are attributable to agricultural and government department dues against the supply of electricity. Moreover, out of the total sales, 30 percent of sales are agriculture sales. Thus, the fund availability of MSEDCL is getting affected due to the less probability of collection from agricultural consumers. Hence, it may not be always possible to MSEDCL to make timely payments to the petitioner,” MSEDCL said in its reply.

“MSEDCL’s reply is a snapshot of what is ailing the power sector in the country. Lack of timely payment by government agencies and subsidies to the agriculture sector is at the core of this problem. Unless these issues are fixed, the sector will continue to stand on shaky ground,” said Raj Prabhu, CEO of Mercom Capital Group.

MSEDCL in its defense said that it had fulfilled its entire cumulative non-solar RPO target till FY 2017-18 and the present wind generator’s payment structure and attitude of frequently filing the petition against MSEDCL is posing problems to it and its consumers.

MSEDCL has also filed a petition to review the wind zone classification of generators who are availing the benefit of higher tariff although they are falling in higher wind zone category.

Wind generators have signed a long term PPA for 13 years, but their useful life is 20 years. However, even after the expiry of the PPA term of 13 years, wind generators are not willing to sell power to MSEDCL at a lower tariff. MSEDCL has carried out the bidding process for the procurement of wind power post expiry of EPA as per the directives of the commission. However, no wind generator has participated in the tender process even after extending the bid date twice as wind generators are trying to sell power under open access at a higher rate directly to bulk consumers.

Therefore, MSEDCL requested the commission to dismiss this petition and give an option for terminating the PPA as no funds are available with MSEDCL for the payment of delayed charges.

The commission noted the financial position of MSEDCL and asked both the parties to reconcile the statement of account within two weeks from the order dated March 26, 2019.

“Reconciliation, wherever necessary, will be completed within two weeks from the date of this order and reconciliation report of outstanding dues along with exact time limit by which the payment would be made will be intimated to Rajlakshmi Minerals with copy to the Commission within two working days thereafter,” MERC’s order said.

In an earlier ruling, MERC directed MSEDCL to pay dues to wind power generators Shah Lulla Estate Developers and BLP Wind Project (Amberi) Private Limited. It has also asked MSEDCL to pay the dues to Kamal Encon Industries Limited (formerly KEC Industries Ltd) for the supply of electricity from its 1.65 MW wind power project located in the state’s Dhule district.

In October 2018, the commission had directed the MSEDCL to pay ₹41.05 billion (~$0.56 billion) in dues to wind power generators in Maharashtra. In July 2018, the MERC had approved the tariff proposed by MSEDCL for the long-term procurement of 500 MW of wind power under non– solar renewable purchase obligations.