The Association of Power Producers has expressed strong opposition to the Central Electricity Regulatory Commission’s (CERC) recent regulation that eliminates payments for power supplied to the grid before the start of commercial production. In a letter dated January 23, the association called for a review of the norm, stating that it could lead to financial losses for power producers.
The amendment mandates zero payment for infirm power—the electricity generated during the trial run of a plant before commercial operations begin. This trial period typically lasts 6-12 months, during which power producers incur substantial expenses.
“Infirm power usually flows for 180 days to a year, and with no compensation, this will result in heavy financial losses for the plant even before commercial operations commence,” the letter stated.
Thermal power generators, in particular, could face expenses of up to ₹1,000 crore during the trial period.
“This will particularly impact merchant power plants that sell power in the market and do not have long-term power purchase agreements (PPAs). The situation is also challenging for power plants acquired through NCLT proceedings, on an ‘as-is, where-is’ basis,” the letter said.
Earlier, the regulatory regime has always allowed recovery of some price/cost towards fuel expenses towards the infirm energy injected into the grid. Such recovery was in the form of either actual fuel cost or applicable rate. There was no situation where a generating company was deprived of any recovery for the infirm energy injected into the grid.
“All generating stations will face serious financial constraints in conducting the testing and commissioning activities to complete the trial run operation, as there will not be any source of funding for the fuel expenses. Normally, lenders do not fund fuel expenses,” the Association of Power Producers said in its letter.
It said that for a certain category of generating station, the fuel expenses incurred to complete the trial run get added to the capital cost, rendering the end consumer to pay about 8-10 paise per unit higher capacity charge for the entire term of the PPA. For others, the recovery of quoted tariff starts only after the commercial date of operation.
“Hence, if there is no means for recovery of fuel expenses for the infirm energy injected either from the grid or beneficiary, it will adversely impact the viability of the project.
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