• Surplus power may cause Rs 8,000 crore loss to discoms in FY17

    State power distribution companies (discoms) are staring at a net loss of Rs 8,000 crore in the current fiscal owing to purchase agreements in excess of power demand, according to India Ratings and Research (Ind-Ra).

    Ind-Ra’s expectation is based on the assumption that discoms will surrender the power purchase agreements (PPAs) with the highest variable cost by paying the fixed costs based on the agreement, it said in a statement.

    According to the statement, 18 out of 36 states/UTs are expected to be power surplus in FY2016-17, as per the Central Electricity Authority’s (CEA) Load Generation Balance Report 2016-17.

    It said that these discoms are likely to surrender some of the excess power they have tied-up in past five to seven years at a loss, thereby further weakening their financial position.

    The discoms in the western and southern regions are expected to be the worst hit due to PPA tie-ups in excess of the power demand in the region.

    Ind-Ra estimates losses of around Rs 4,000 crore by discoms in the western region and Rs 2,450 crore in the southern region due to the maximum amount of long term PPA with a provision of fixed tariff in the past.

    The long-term commitments at a fixed cost in PPAs are preventing some state power distribution companies (discoms) from procuring low cost merchant power traded on the power exchanges.

    The Punjab State Electricity Regulatory Commission has recently revealed that the losses due to the surrendering of excess power for FY2016-17 is expected at Rs 2,075 crore.

    The commission has directed the Punjab State Power Corporation Ltd to look at ways to reduce this fiscal burden by selling surplus power outside the state.

    The Karnataka Electricity Regulatory Commission (KERC) also recently ended the earlier rule of the state government that power producers must generate at 100 per cent capacity and supply only within the state.

    Generators can now apply for a no objection certificate from the KERC to sell their surplus power outside the state, it said.

    Many of the long term PPAs have provisioned for Rs 1.25 to Rs 1.75 fixed prices per unit of electricity compared to an all-inclusive cost of around Rs 2.5 per unit (based on actual power rates on power exchanges for FY2015-16).

    Ind-Ra estimates that spot power tariffs on the exchanges are unlikely to increase beyond the current range of Rs 2.0 to Rs 2.5 per unit over the medium term, which is in line with the CEA’s projections of 1.1 per cent energy surplus and 2.6 per cent peak load surplus during FY2016-17 across India. Tyler Wong Jersey

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