The government proposes to allow electricity generating plants to stop power supply to distribution utilities that default on bill payment for more than seven months and sell the produce somewhere else. The fixed rate burden of the distribution licensees shall be reduced to that extent, an official statement said.
Industry experts said the provision, being integrated in draft Electricity Late Payment Surcharge, 2021, would benefit power generators that do not have third party sale clause in their power purchase agreements (PPAs) with state distribution utilities. The rules propose to supersede existing PPA arrangements.
The draft circulated for consultations by the union power ministry on Thursday, proposes to provide generators an option to sell power to third parties or on exchanges, and recover their cost after
seven months of non-payment.
“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 PPA; then, notwithstanding anything contained in the Power Purchase Agreement 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 retaining 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,” the draft stated.
It added that the claim shall be reconciled on a yearly basis and shall be limited to only under recovery of the fixed charges or capacity charges.
The official statement said in order to enhance the confidence of investors in generation projects and reduce the burden of distribution licensees, the principle of first-in and first-out for payment of discom bills has been proposed through the rule.
All the bills payable by a distribution licensee to generating firms or trading licensees for power procured shall be time tagged and 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, the rules said.
The Electricity (Late Payment Surcharge) Rules 2021 issued in February lowered the late payment fee chargeable by power and transmission developers from distribution firms by linking it to State Bank of India's lending rate against the current 18%.