MoP allows discoms to draw electricity after the expiry of PPA

The Ministry of Power (MoP) has notified that the distribution companies (discoms) can purchase power from the common pool after the expiry of power purchase agreement (PPA). The new guidelines are a result of the concerns of generating companies, who were burdened with expensive assets as discoms frequently choose to purchase electricity from power plants with fewer costs of operation. Due to this practice’s imbalance, the generating companies were left with a portfolio of more expensive assets.

After careful consideration, it has been confirmed that the generator and the buyer should have equal rights. After a PPA expires, both parties are released from their duties to supply or purchase power from one another. The parties can enter into a new agreement, supporting the idea of bilateral freedom in the power industry. The generator also has the choice to make bilateral agreements with any organisation they choose to sell power through exchanges. This strategy guarantees the creation of a fair and competitive market.

Additionally, the government has unveiled a plan to combine central generating stations run by central public sector undertakings whose PPAs have expired. These stations will be provided for sale to potential individuals, packaged with gas-based power. All buyers from the pool will pay the same, transparent price for power, ensuring a fair distribution of the available resources.

On April 20, 2023, the MoP released the pooling tariff rates for plants with expired PPAs, superseding the earlier guidelines released in March 2021, followed by explanation issued in July 2021. This new plan seeks to level the playing field for all parties and is anticipated to improve resource sufficiency in the power sector of the country.  For this, the Central Electricity Regulatory Commission will be responsible to take the required actions to establish the necessary regulations for this scheme’s operationalisation in order to implement it efficiently.