PPA with NTPC raises questions of tariff overload

This is a questionable deal that will burden the discoms and consumers and benefit NTPC, says M. Venugopala Rao, convenor of Centre for Power Studies.
Energy consumers in Andhra Pradesh may have to bear a burden of Rs. 4505 crore over for 25 years if the AP Electricity Regulatory Commission (APERC) approves in full the power purchase agreement (PPA) between NTPC and the State’s two discoms for supply of power from the former’s proposed ultra mega solar power project in Anantapur district.

In a submission to the regulator, the Centre for Power Studies (CPS) looked beyond the already “inflated” purchase of power at Rs.6.16 per kwh.

After a clause-by-clause study of the PPA and some meticulous calculations, it has arrived at an “additional avoidable” charge of Rs. 3.55 per kwh, which escalates the tariff to Rs. 9.71 per kwh at the discom end.

The CPI(M) also has filed a similar submission.

Considering that NTPC is proposing to build up a capacity of 250 MW under stage one of the project in order to generate 397 million units of solar power per annum at a capacity utilisation factor (CUF) of 18.31 per cent, CPS projects a burden of about Rs. 180 crore annually on the discoms.

This could likely be passed on to the consumers. The CPS’ estimate of this markup over the 25-year period of the PPA is Rs. 4505 cr.

And when the project attains its 1000 MW capacity and generates 1588 mu per annum, that burden would be an astronomical Rs. 18,000 crore.

The CPS arrived at the additional amount of Rs. 3.55 per kwh by taking into account various terms and conditions in the PPA, solar power supply delivery points of 33/220 KV sub-stations, transmission and distribution losses and operating charges for supply and incentives offered to NTPC like viability gap fund (VGF) and Acclerated Depreciation Benefit (ADB). The excess charge looks huge at a time when the purchase price of Rs. 6.16 itself is seen as being on the higher side compared to the Rs. 5.17 per kwh paid to private developers finalised through competitive bidding and approved by APERC.

More importantly, the price paid to private developers is devoid of transmission losses, operating charges and incentives of VGF and ADB. The CPS will make a presentation to APERC when the issue comes for public hearing on November 7.

“This is a questionable deal that will burden the discoms and consumers and benefit NTPC,” said M. Venugopala Rao, the convenor of CPS. When contacted, an NTPC spokesperson said the PSU would respond at the APERC hearing.

Price escalation point

Much of the power purchase price escalation is traced to the circuitous route being adopted for evacuation of power covering various transmission agencies up to the interconnection point of the substation of APTRANSCO/discom.

Strangely, AP Solar Power Corporation Limited (APSPCL) is involved, though it is neither a transmission nor a distribution licensee.

Another reason for the escalation is a PPA clause wherein the government of Andhra Pradesh and the discoms agreed to bear wheeling/ transmission charges, transmission losses up to the interconnection point of the sub-station of APTransco/discom, taxes, fee and expenditure for required permissions for setting up the project.

This is unfair and not done anywhere, CPS argued and appealed to APERC not to accept the PPA in the present form as it will set a bad and dangerous precedent damaging the long-term interests of consumers.

A sticking point found by CPS is the way NTPC is seeking “to penalize” the discoms for its own failure and its EPC contractor for ensuring a minimum annual CUF of 18.13 per cent.

“It looks like a variant of the notorious clause of deemed generation of paying tariffs for power which is neither generated, nor purchased nor consumed, which was there in the past PPAs between erstwhile AP Transco/discoms and private projects, GVK and Spectrum.”

About Ritesh Pothan

Ritesh Pothan, is an accomplished speaker and visionary in the Solar Energy space in India. Ritesh is from an Engineering Background with a Master’s Degree in Technology and had spent more than a decade as the Infrastructure Head for a public limited company with the last 9 years dedicated to Solar and Renewable Energy. He also runs the 2 largest India focused renewable energy groups on LinkedIn - Solar - India and Renewables - India
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