NTPC threatens to choke BSES discoms' supply

Serves a 90-day notice over letter-of-credit default; says will stop power flow beginning Feb 11

The high-voltage drama in Delhi over electricity supply continued on Saturday, with power generator NTPC Ltd threatening it would stop its 2,000-Mw supply to BSES distribution companies (discoms), which cater to the eastern, western and southern parts of the city, beginning February 11, over non-repayment of dues. Also, Chief Minister Arvind Kejriwal criticised the Delhi Electricity Regulatory Commission (DERC) for allowing private discoms to raise power rates by up to eight per cent.

Reliance Infrastructure-owned BSES supplies power to over 75 per cent of the city’s 3.4 million consumers through BSES Yamuna Pvt Ltd (BYPL) and BSES Rajdhani Pvt Ltd (BRPL). The two companies source as much as 2,000 Mw, or 60 per cent of their total power requirement, from NTPC. Any disturbance in this supply could lead to power cuts of eight to 10 hours a day, said a person close to the development.

According to the Power Purchase Agreement (PPA) between the discoms and NTPC, BSES is to ensure Letter of Credit (LC) for a minimum amount. In a notice that NTPC sent to BYPL, the power generator said: “Since BYPL has not provided the LC of the requisite amount (creating a payment shortfall of Rs 96 crore), notice for regulation of power supply for 90 days with effect from the midnight of February 11 is hereby given.”

On Saturday, NTPC served a similar notice on BRPL for failing to maintain the LCs. “Despite our repeated follow-up and meeting with senior BRPL officials, it has not been able to recoup the LCs for the full value within seven days, a breach of PPA provisions,” the notice read. Under the PPA, NTPC has the right to regulate or sell a discom’s share of power to a third party in the event of a shortfall in LC.

The supply of power will remain suspended for 90 days. In case BSES discoms fail to rectify the default (shortfall in LC) during the notice period, NTPC will have the right to terminate the PPA after intimating the discoms in writing. The Central Electricity Regulatory Commission (Regulation of power supply) regulations also provide for cutting supply in the absence of a payment-security mechanism.

Earlier this week, BYPL had told the Delhi government that power cuts of eight to 10 hours were likely, as it lacked the financial resources to pay generation companies and banks had stopped credit flow due to accumulation of revenue gap (regulatory assets) of an estimated Rs 6,229 crore. There were no funds to pay aggregate dues of Rs 204 crore to NTPC and NHPC for power procured in January, it had added.

BYPL’s claim had on Friday led Kejriwal to threaten the discoms with cancellation of their licences. However, under the current provisions of the Electricity Act, 2003, cancellation of a discom’s licence is the exclusive domain of the state power regulator concerned. The regulator is required to establish “public interest” and serve a three-month notice before revoking a licence.

POWER CUT

Shortfall in LC after encashment on Jan 31
BYPL: Rs 168.2 cr
BRPL: Rs 271.6 cr

Proposed regulation
BYPL: 811 Mw
BRPL: 1,261 Mw

Duration of regulation
90 days for both — from midnight of Feb 11 to May 12