Renegotiations of power pacts may hit APTransco hurdle

The process of renegotiation of power purchase agreements (PPAs) between the state government and the existing independent power producers (IPPs) is apparently heading for an impasse with the developers and the state power utility, APTransco, not showing any signs of relaxing their respective stands.

A government committee headed by state finance minister K Rosaiah has so far held meetings with GVK Power and Lanco Kondapalli, two IPPs, apart from holding separate discussions with the APTransco officials on the prospects of reducing the fixed cost. Discussions with the Spectrum Power Corporation, another IPP, now taken over by IDBI are yet to be initiated by the state government.

With the committee having met only once, private power producers are miffed that APTransco has not waited for the negotiations to get over, and has sent fresh notices to the IPPs asking them to reduce the fixed cost on the power. The move to send notices to the IPPs has led to some of them moving the courts.

While IPPs are upset over the attitude of APTransco in sending notices even as they are in talks with the committee set up by the state government on the same issue, the power utility is apparently upset that the IPPs have not accepted any of its decisions on the reduction of fixed cost.

"Just because there is a committee for negotiations, how can we stop acting on the issues which are well within our purview? After all, all our actions are aimed at public interest," says a senior APTransco official.

"Then, what is the point in negotiations on the same issue, if APTransco goes ahead as per its wishes," one of the IPP representatives points out. They also point out that the whole idea of agreeing to negotiate with the government committee indicated their willingness to revisit the issue of fixed costs.

"While the IPPs have responded positively to the government's request to reduce the fixed cost, they should spell their plans before the committee," APTransco officials argue.

At one level, it appears that while APTransco is stepping up the pressure on the IPPs to yield to the 'necessity' to reduce the fixed cost on various accounts, the developers, on the other hand, want these discussions to be free from the influence of APTransco before they make any concrete proposals on the contentious issues of reduction in capital cost.

"If I propose to reduce, say a two paise on each unit, APTransco may ask me to further reduce it to some level. Why should I take such a risk," a representative of an IPP told Business Standard.

From the look of it, it seems that APTransco's pressure tactics could yield exactly the opposite result, if the IPPs were to harden their stands.