The Ministry of Power on March 1, introduced the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, to enforce that power generators offer surplus power to the power exchange.
The amendments will enhance the reliability of the power supply for all consumers.
As part of the new rules power-generating companies will be eligible to claim fixed charges for surplus power, only after they offer surplus energy in the power exchange the quantum of power not requisitioned by distribution companies.
Union Minister for Power and New & Renewable Energy Shri R. K. Singh said that some power generators were not offering this surplus power in the market, thus resulting in unused power capacity at the national level.
"To address this issue and optimize the use of available power, power generators who do not offer their surplus power will now not be eligible to claim capacity or fixed charges corresponding to that surplus quantum," the government said in a press release.
Additionally, this surplus power cannot be offered for sale in the power exchange, at a price of more than 120 percent of the energy charge plus the applicable transmission charge.
In addition to the regulatory measures, the draft rules also establish a clear timeline for the restoration of the power supply following the settlement of outstanding dues, mandating a reinstatement within two days.
The National Load Despatch Centre has been given the responsibility to elaborate detailed procedures to implement these rules, ensuring uniform compliance across the sector.
Recognising the cash flow problems arising out of outstanding receivables of gencos from discoms and increasing basic payment discipline in the power sector value chain, the government has notified the new rules.
These rules entail obligations upon the discoms to clear their legacy dues as existing on June 3, 2022, in a time-bound phased manner in equated monthly installments with benefits of non-applicability of late payment surcharge.
These rules also provide a framework for time-bound clearance of current dues through a payment security mechanism, failing which it allows progressive withdrawal of open access as well as power regulations. It also allows discoms to avail of loans from PFC Ltd. and REC Ltd. to clear their dues to gencos.
Data from the Ministry of Power showed that the current payments from generation companies (gencos) are fully current, and the outstanding legacy dues of gencos have experienced a significant reduction by 63 percent. The amount has decreased from Rs 1.396 lakh crore to Rs 51,268 crore in a little over a year since the notification of the late payment surcharge rules.
In August, 2022, the Centre barred 27 distribution companies (discoms) across 13 states from buying or selling electricity in power exchanges citing their non-payment of dues to generation companies (gencos). The affected states said the move could lead to power outages, even as some immediately started clearing their outstanding amounts to avoid a power crisis. However, it was only after the states cleared their dues that their access to the power exchanges was restored.
The payment discipline rules introduced by the government have resulted in the Aggregate Technical & Commercial (AT&C) losses of discoms coming down from 22.62 percent in 2013-14 to 16.42 percent in 2021-22. These have further declined to about 13.5 percent in FY23 from 16.4 percent in FY22, according to provisional data prepared by the Ministry of Power.
AT&C losses are a combination of energy loss and commercial loss. While energy loss may comprise technical loss, theft, and inefficiency in billing; commercial loss constitutes default in payment and inefficiency in the collection.
Furthermore, the new rules also enforce stricter regulations on power utilities that default on electricity payments.
According to the new rules, if dues are not settled within two and a half months after bill presentation by the discoms, or if there is a default on installment payments under rule 5, the power supply to the defaulting entity will be subject to a structured regulation.
The regulation will encompass all access types, from short-term to long-term, with the degree of restriction increasing progressively by ten percent each month for the duration of the default. This structured approach is designed to encourage entities to clear their dues promptly to avoid stringent penalties.
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