Power Ministry wants to give discoms the option to exit PPAs after end of term: Sources

• The draft proposal will allow power generating companies (gencos) to sell power in any mode after the exit of discoms

• The mechanism would benefit states that have long-term PPAs with Central gencos, which supply power at a relatively higher tariff

New Delhi: Keen on giving power distribution companies (discoms) a chance to exit power purchase agreements (PPAs) after the completion of the pact's term and the option to procure cheaper power from elsewhere, the Ministry of Power is set to float a draft proposal in this regard, said sources in the know of the matter. The draft proposal, which the Power Ministry is going to float soon, will also allow power generating companies (gencos) to sell power in any mode after the exit of discoms. The point is to allow states with long-term PPAs with Central gencos the option to procure cheaper power from other sources and under more flexible timelines, said sources.

The mechanism would benefit states that have long-term PPAs with Central gencos, which supply power at a relatively higher tariff. The draft proposal will allow states power utilities to exit PPAs after the completion of 25 years.

Discoms will be able to procure power under short-term contracts & RTM

The draft proposal will allow discoms to avail relatively cheaper power procurement via routes like short term contracts, or from the day-ahead or real-time markets (RTM), and through open access. However, it will not allow states that have relinquished the contract after the end of its term to again seek power procurement under the same PPA terms and conditions.  

The backdrop

The two main power exchanges in India — IEX (Indian Energy Exchange) and PXIL (Power Exchange India Limited) —started RTM (Real Time Market) for electricity trading on June 1 this year. The RTM is an endeavour by electricity regulator CERC (Central Electricity Regulatory Commission) to allow buyers more flexibility in balancing supply and demand. The RTM has auctions every 30 minutes. There are 48 auction sessions during the day and the delivery of power is done within one hour of the closure of the bid session.  

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The bidding process on these platforms ensure best price discovery —  a feature that will definitely seem lucrative to discoms that are struggling to pay their dues and bring down losses.

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