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    Power companies explore legal options in payment clause

    Synopsis

    The Central Electricity Regulatory Commission (CERC) in the Friday order decreased late payment surcharge (LPS) payable by discoms to generation and transmission companies to 1% per month from the previous 1.5% per month from April 24 till June 30.

    New Power BCCL 3
    NEW DELHI: Power producers are exploring legal options after the Central power regulator referred to 'force majeure' clause in an order reducing surcharge on delayed payments by discoms to generation plants till June. They are worried that state distribution companies will interpret the reference of the force majeure clause in the order issued on Friday by CERC to their advantage. The Delhi Electricity Regulatory Commission has also backed BSES Delhi discoms invoking force majeure clause.

    ET on Thursday reported that the power companies have said that nationwide lockdown to prevent coronavirus spread is no premise for state electricity distribution utilities to invoke force majeure clause and renege from contractual obligations under power purchase agreements (PPAs). Discoms of states like Delhi, Madhya Pradesh, Telengana, Punjab, Haryana and Uttar Pradesh have also invoked force majeure event as per PPAs with many plants citing reduction of electricity demand due to lockdown to prevent the spread of Covid-19.

    A senior executive in a power firm said, "Power producers are exploring their options as the regulator order has created more ambiguity than clarity. The intent of power regulator is not evident from this order, as the PPAs do not provide for exemption or reduction in LPS."

    The Central Electricity Regulatory Commission (CERC) in the Friday order decreased late payment surcharge (LPS) payable by discoms to generation and transmission companies to 1% per month from the previous 1.5% per month from April 24 till June 30.

    The reduction in LPS will be applicable on generation and transmission signed on cost-plus basis and for dues accruing from the lockdown period till June 30. For PPAs signed on tariff-based competitive bidding the ‘relief on the Late Payment Surcharge for payment which becomes delayed beyond 45 days during the lockdown period will be claimed in terms of the force majeure provisions of the contracts,’ the order said.

    The suo-moto proceedings were initiated by the regulator following directions from the Union power ministry under section 107 of the Electricity Act, 2003. The power ministry on March 28 issued a directive to CERC asking it to reduce the LPS to reduce burden on the state power distribution companies that are not able to collect bills due to Centre-imposed lockdown to contain spread of Coronavirus.

    While invoking force majeure, state power discoms have told many power plants that their electricity will not be scheduled and the projects should stop declaring availability of electricity. Some have denied the power companies of fixed costs during the lockdown period. Power producers have told the Union government that invoking such clauses by distribution companies will lead to cash flow problems and unavoidable disruption in power supply.



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    ( Originally published on Apr 03, 2020 )
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