27 September 2017 15:41:56 IST

Centre to give regulators more teeth to punish PPA-dodging discoms

Power utilities in AP, Karnataka and UP are reneging on agreements with developers

The Centre is looking to strengthen the legislative framework to prevent power distribution entities from dodging long-term off-take commitments made to generators. This could include stricter penal provisions for discoms that fail to meet their commitments.

Minister of State (Independent Charge) for Power and New and Renewable Energy RK Singh told BusinessLine , “We want to strengthen the regulators and make them more independent... We want them to have the power to penalise power distribution companies for not honouring power purchase agreements (PPAs).” Singh’s comments assume significance as State government-controlled distribution utilities have been terminating PPAs with generation companies.

A power sector analyst said, “It is the responsibility of State electricity regulators to prevent generation or distribution companies from backing out of their commitments. Members to the State Electricity Regulatory Commissions are appointed by State governments, who in turn control the power distribution companies. This puts the regulators on the back foot while taking decisions that punish discoms.”

Power distribution company reforms have been at the centre of policy initiatives of the National Democratic Alliance government. In an official statement, the power ministry said a State-wise analysis shows the Ujwal Discom Assurance Yojana (UDAY) is resulting in significant improvement across profitability and operational parameters. “Of the 27 States & UTs which have joined UDAY, 23 are exhibiting improvement in AT&C Loss reduction or decrease in Cost Vs Revenue gap (ACS-ARR Gap),” the statement added.

Key defaulters

Despite this, Madhya Pradesh, Maharashtra and Tamil Nadu have been identified as key defaulters, with payment delays of 9-12 months, to wind power producers. Andhra Pradesh too figures on the list. The total dues that discoms owed to wind energy players alone swelled to over ₹2,000 crore till June.

A statement by analyst firm ICRA said State discoms in Andhra Pradesh, Karnataka and Uttar Pradesh are renegotiating or cancelling PPAs with wind and solar power developers.