Govt releases draft rules for allowing gencos to sell power to third parties

The Ministry of Power on Thursday circulated draft Electricity (Late Payment Surcharge) Amendment Rules, 2021, through it seeks to amend the norms for facilitating electricity generators to sell power to third parties. The proposed change can reduce fixed costs and cut retail tariff for electricity consumers.

The Ministry has put up the draft rules on its website and is seeking public comments on the same, noted a government statement.

The ministry proposes to further reduce the burden of the distribution licensee (discoms) in order to cut the retail tariff for the electricity consumers. It noted that generating companies are being given an option to sell power to a third party and recover their cost. To this extent, the fixed cost burden of the distribution licensee will be reduced, the Power Ministry added.

The Power Ministry noted that according to 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 as prescribed in the PPA (power purchase agreement), the generating company may sell power to any consumer or any other licensee or power exchanges, for the period of such default.

It added the generating company's claim will be retained on payment of fixed charges or capacity charges from the distribution licensee, after giving a notice of at least 15 days to the distribution licensee. "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," stated the Power Ministry.

The Ministry further explained that 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 order of payment i.e. the principle of first in and first out for payment of bills has been proposed," conveyed the Power Ministry.

According to the draft rules, 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.

It adds that 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. This will ensure that payment against a procurement is not made unless and until all procurement older than it has been paid for.

The Power Ministry explained that 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.

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