In a breather to ailing power distribution companies (discoms) in Andhra Pradesh, the Vijayawada high court on Tuesday stayed orders of the Union power ministry directing them to provide letters of credit to wind and solar energy developers against payments.
The court, in its interim orders, also blocked the Central power ministry and its agencies from disallowing Andhra discoms to buy power through the open access system and power exchanges.
The relief comes as the state reels under coal shortages at its thermal power stations and electricity is procured through short-term open access and power exchanges to meet its needs.
The state government headed by YS Jaganmohan Reddy, which came to power in May, decided to renegotiate power purchase agreements with wind and solar power generators signed during the previous Chandrababu Naidu regime, alleging irregularities and high tariffs. The government also stopped procuring power from the renewable energy companies.
The power purchase agreements prescribe maintaining an adequate payment security mechanism in the form of letters of credit (LCs) to the renewable energy developers, but the Union power ministry found that many discoms had not adhered to this.
Last Thursday, the Power System Operation Corporation Ltd. (Posoco), an arm of the power ministry, wrote to the Andhra Pradesh State Load Dispatch Centre (SLDC) asking it to provide renewable energy developers with LCs by October 15.
Posoco said the ministry of new and renewable energy had brought to its notice that many renewable power companies in the state had not been given LCs by various discoms.
Referring to earlier communications on the subject, the central agency said, “In spite of provisions in place in PPAs for providing LCs, these DISCOMS have not provided LCs to the wind and solar power developers as indicated in reports.”
While directing the Andhra Pradesh SLDC to comply with the deadline on providing LCs, Posoco warned about consequences if the directives were not followed. It said the Southern Regional Load Dispatch Centre (SRLDC) “will be constrained to disallow power transactions under STOA (short term open access) and through power exchange from 16th October, 2019 in compliance of MOP (ministry of power) direction.”
Perturbed by the ministry’s orders, the discoms moved the high court.
“Discoms have challenged this in the high court and the court has suspended the circular (of Posoco) for three weeks” till November 5 through interim stay orders, AP Power Transmission Corporation joint managing director KVN Chakradhar Babu told ET.
The discoms argued that stopping them from buying power through the open access system would have had “catastrophic consequences.”
They said the opening of LCs as a condition of PPAs was waived by the power producers and the Central government could not interfere with the contractual conditions. They contended that Central government agencies have no jurisdiction to keep discoms out of the power exchange or short-term open access, which were governed by the Central Electricity Regulatory Commission.
The discoms submitted to the court that the wind and solar power generators didn’t insist on LCs and that they were honouring bills being raised whenever funds were available.
They said that with the high court hearing cases pertaining to the renegotiation of PPAs and payments to wind and solar energy developers, Central agencies cannot interfere now.
