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No free lunches, pay for power consumed as per PPAs: Power Minister to discoms

The Union power ministry in clarification to its March 28 order said, “The obligation to pay for power within 45 days of the presentation of the bill or as provided in the PPA (power purchase agreement) remains unchanged,” and added that the obligation to pay for capacity charges as per the PPA shall continue. The remains unchanged for transmission charges, the order said.

, ET Bureau|
Last Updated: Apr 06, 2020, 09.51 PM IST
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Power companies welcomed the clarification saying it will deter discoms from using wrong justification to invoke force majeure.
NEW DELHI: The government has come to the rescue of electricity generating companies through a clarification on Monday which stated that the distribution companies will have to continue meeting their payment obligations and pay fixed charges to the projects in case power is not being taken.

Power companies welcomed the clarification saying it will deter discoms from using wrong justification to invoke force majeure.

The Union power ministry in clarification to its March 28 order said, “The obligation to pay for power within 45 days of the presentation of the bill or as provided in the PPA (power purchase agreement) remains unchanged,” and added that the obligation to pay for capacity charges as per the PPA shall continue. The remains unchanged for transmission charges, the order said.

It said the late payment surcharge reduced by the central electricity regulator will apply to period between March 24 and June 30. Payments which were overdue before March 24 and will be due after June 30 will attract the delayed payment surcharge at rates given in the PPA/regulations, the clarification said.

ET on April 3 reported that the power companies have said that nationwide lockdown to prevent coronavirus spread is no premise for state electricity distribution utilities to invoke force majeure clause and renege from contractual obligations under power purchase agreements (PPAs).

Discoms of states like Delhi, Madhya Pradesh, Telengana, Punjab, Haryana and Uttar Pradesh have also invoked force majeure event as per their PPAs with many power plants citing reduction of electricity demand due to lockdown to prevent the spread of Covid-19.

“There has been some misconception regarding the interpretation of this order and queries have been received in this ministry. It is made clear that the obligation to pay for the power within 45 days of the presentation of bill (or the period given in the PPA) remains the same. Therefore, while for scheduling power the distribution companies will need to either deposit or give LoC for 50% of the cost of power they want to be scheduled, the remaining 50% will have to be paid within the period given in the PPA, failing which the delayed payment surcharge will apply,” the clarification said.
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