Govt proposes flexibility to Gencos on 3rd party sale of electricity meant for discoms in default

In yet another reform initiative aimed at streamlining the payment mechanism in the power sector, the power ministry proposes to extend freedom to generating companies to sell power to a third party to the extent of default by discoms and recover their cost.

The Ministry of Power on Thursday circulated draft Electricity (Late Payment Surcharge) amendment Rules, 2021 seeking comments from the stakeholders on its proposals that also aim to reduce the burden of the distribution licensee and help in bringing down the retail tariff for the electricity consumers.

As per the draft rules, if a distribution licensee has any payment including late payment surcharge outstanding after the expiry of seven months from the due date of payment as prescribed in the (power purchase agreement) PPA; then notwithstanding anything contained in the PPA or the Power Supply Agreement, the generating company may sell power to any consumer or any other licensee or power exchanges, for the period of such default.

While doing so, the Genco will retain its claim on payment of fixed charges or capacity charges from the distribution licensee, after giving a notice of at least fifteen days to the distribution licensee for the power supplies it made without getting paid. The claim, if any, shall be reconciled on annual basis and shall be limited, to only under recovery of the fixed charges or capacity charges, the amendment rules state.

The changes will give an opportunity to generating companies to recover the cost through third party sale of power going outside the terms of a PPA while reducing the burden on Discoms, in payment default, to settle the dues only through payment of fixed charges on electricity supplied to it.

Further, due to non-payment of outstanding dues, the distribution licensees are burdened with the increase in the late payment surcharge. In order to boost the confidence of the investor in generation projects, the generation project developer and also to reduce the burden of the distribution licensee, the principle of first in and first out for payment of bills has been proposed in the draft rules.

According to the proposal, all the bills payable by a distribution licensee to a generating company or a trading licensee for power procured from it or to a transmission licensee shall be time tagged with respect to the prescribed date of payment specified in the PPA. Accordingly, the payment shall be made by the distribution licensee first against the oldest procurement of power and then to the second oldest procurement and so on so as to ensure that payment against procurement is not made unless and until all procurement older than it have been paid for.

All payments by a distribution licensee to a generating company or a trading licensee for power procured from it or by a user of a transmission system to a transmission licensee shall be first adjusted towards Late Payment Surcharge and thereafter, towards monthly charges, starting from the longest overdue bill, the draft rule has proposed.