Punjab old legal opinion in focus

As controversial Power Purchase Agreements (PPAs) between the Punjab government and private thermal plants take center stage, a legal opinion by Punjab Attorney General Atul Nanda, in which he had raised serious doubts about the entire exercise behind the PPAs pointing fingers violations that led to expensive energy, is once again in the spotlight.

Nanda, in his legal opinion to the Punjab government, has stated that there has been a deviation from the bidding guidelines, adding that the state unnecessarily increased the very amount of power required to be purchased by the then state government. Nanda has argued that the government did not need to pay fixed fees to these plants when the national grid had cheaper power available. He went on to claim that the power requirement was improved to pass the state’s maximum load, during rice planting, as the average load.

The PPAs are in focus as the state government is in the process of finalizing a White Paper on the energy scenario.

The opinion was presented to the government in February last year, but sources said the draft White Paper prepared by state government officials so far does not include the legal opinion. The CM had recently held a meeting with the aim of reviewing the preparation of the White Paper.

Two of CM’s cabinet colleagues, Sukhjinder Singh Randhawa and Tript Rajinder Singh Bajwa, rejected the draft White Paper saying that the same officials who were instrumental in preparing the PPAs at the time of their execution were the ones who prepared the Book. White. The ministers also said that the White Paper did not set any responsibility for the previous government despite the fact that the AG had clearly pointed the finger at everything that had gone wrong. The CM has asked state officials to work on the White Paper again.

The government has been blaming faulty PPAs for expensive power.

These PPAs were signed between the Punjab government and two private thermal plants: Talwandi Sabo Power Limited (TSPL) and Nabha Power Limited (NPL) by the former SAD-BJP government. The livelihood allowance paid to these thermal plants, even when the state does not require energy from these entities, is a bone of contention in the state. The load is passed on to consumers. Punjab is among the states where energy is very expensive.

Nanda, in his opinion, has stated: “There can be no doubt that the requests preferred by PSPCL under section 63 of the Electricity Act of 2003, for the approval of the tariff to be paid to NPL and TSPL were based on assumptions/factors that were false, technically incorrect, contrary to decisions made / approvals granted or otherwise contrary to law. There have been unacceptable deviations from the 2005 competitive bidding guidelines and issues that need to be corrected/revised and remedied and that would then have a significant impact leading to a revised / reduced fee structure. ”

He also added that the same amount of energy required to be purchased by the then-state government was unnecessarily increased by the state. This led to an overpayment of a total of Rs 3,684 crore as ransom charges up to FY 2019-20 to private companies and a consequent loss to the state. This has also led to an increase in fuel costs of Rs 84 million. It is estimated that between 400 and 500 million rupees a year is passed on to consumers as a cost due to imported coal.

In his view, the 17th Electric Power Survey conducted by the Central Electricity Authority, the power requirement for the state was only Rs 1,800 MW. According to the bidding guidelines, a state’s demand forecast should be based on an electrical power survey conducted by the Central Electricity Authority. The reason is that any urgent/seasonal/additional energy required can always be purchased from the national grid at cheaper comparative rates. There is no need to carry permanently fixed charges for this.

It was first sought to increase the state requirement from 1,800 MW to 3,100 MW in 2007 and then 2,100 MW in 2008. The plants were finally established/signed PPAs on the basis of said additional/extra energy requirement which in reality does not. I need and haven’t even used it. For such energy, the state was contacted / but not used and therefore its consumers have had to pay surrender charges which have been in the order of Rs 1,633 crore to NPL in FY 2012-13 to FY 2019-20 and Rs 2,050 crore to TSPL from FY 2014-15 to the fiscal year 2019-20.

To justify the earlier increase in the power requirement, PSPCL submitted the revised figures to the Punjab State Electricity Regulatory Commission based on factors that were in error; among them, the maximum load calculated by including the additional energy required by the agricultural sector, which is actually only during a four-month period between June and September, when the maximum load increases by approximately 1,500-2,000 MW. This is between 2 and 2.5 times the average demand. There was no requirement to configure generating capacity for the year-round sustained generation to meet a peak load demand requirement that is only four months. This has resulted in an underutilization of capacity for the balance period of the year for which the PSPCL today had large delivery charges to private thermal plants, Nanda said in his opinion.

Although the seasonal peak in demand was only during these four months, surprisingly there was no provision in the PPAs to guarantee minimum availability during these peak demand months. The AG has further stated that in similar PPAs executed by UP with Lanco Apara Power Private Limited, the minimum availability is classified according to said peak / non-peak periods. The normal period is 85 percent and the period of less activity is 80 percent and, in the event that availability is not met, the fine is taxable to the electricity company. The legal opinion says that such safeguards have not been incorporated into the current agreement with either NPL or TSPL.

Atul Nanda was asked to examine whether Punjab can enact legislation to “prohibit or make it illegal for any private operator to request payment for energy, whether purchased or not, at rates that are significantly higher than those available in the national power. “. the exchange at that time. ”

Everything that’s wrong with PPPs: what Advocate General Atul Nanda thinks

  • The fee to be paid to PV plants based on false / technically incorrect assumptions
  • The state’s actual power requirement increased unnecessarily, leading to an overpayment to Pvt companies
  • The 4-month peak load induced by agricultural demand was passed off as the state average load
  • The 2005 public bidding guidelines were not followed to enter the PPAs
  • It is wrong to pay fixed charges to Pvt companies as surplus energy available from the national grid at cheaper rates
  • The cost of Rs 400 to 500 cr per year is passed on to consumers
  • There is no minimum availability guarantee on PPAs for peak / non-peak seasons