Covid-19 lockdown: States stop renewable power purchase, hold back payments

Renewable power including solar, wind, small hydro and biomass comes under ‘must-run status’, that is, it cannot be stalled or shut under any circumstances.
Following the lockdown and fall in electricity demand, several states are now curtailing renewable power purchases and have also issued notices on non-payment to generators. These states have invoked Force Majeure clause in their power purchase agreements (PPA) with renewable projects to nix power supply and payment.

While Punjab has told renewable power producers to run their units at their own cost and risk, Uttar Pradesh, Andhra Pradesh and Madhya Pradesh have refused payment and have stated that they are curtailing renewable power.

Renewable power including solar, wind, small hydro and biomass comes under ‘must-run status’, that is, it cannot be stalled or shut under any circumstances.

Taking note of the matter, the Ministry of New and Renewable Energy in a notice on Wednesday asked the states to comply with the must-run status of renewable energy. It also asked them to ensure timely payment to generating companies even during the lockdown period. "The status of must-run should remain unchanged during the period of lockdown," the ministry said.

Punjab had issued a notice on Monday to several renewable power producers that supply to the state, it will curtail electricity power purchase and generation. Citing the Force Majeure clause, the state told the power producers, if they inject any power supply in the state’s grid, it will be at their own risk and cost.

Force Majeure clause (FMC) under the supply or project commissioning terms pertains to events and circumstances that are beyond the control of humans. The clause, however, does not excuse a party's non-performance entirely, but only suspends it for the duration of the FMC.

Punjab State Power Corporation Limited (PSPCL) said in it notice to power producers, “You are hereby intimated that as per Force Majeure Clause, PSPCL is prevented from performing its obligation of purchasing and accepting energy from your generating company facility on account of force majeure event of Epidemic (Covid-19) with immediate effect till this epidemic lasts. During this period, if any power is injected into PSPCL/PSTCL system then the same will be at your risk & cost.”

Business Standard recently reported in March, that the demand for power went down by 31 per cent, while there was a 68 per cent increase in capacity which has been backed down.

Last week, Uttar Pradesh was the first state to refuse payment to solar power projects citing Force Majeure and inability to pay in wake of reduced revenue. The plea was declined by the Solar Energy Corporation of India (SECI).

SECI which comes under the ministry of new and renewable energy and supplies renewable power to UP said inability of paying bills due to “insufficiency of finances or funds” cannot be claimed as force majeure Leading renewable energy players such as Azure Power, ReNew Power, SoftBank Energy and Hero Future Energies supply power to UP.

Madhya Pradesh which is India’s leading renewable power generating state also issued notice to all renewable power generators that it will be unable to meet its obligations under the PPA due to “unprecedented fall in revenues from electricity bill collection.” The state also said that it cannot determine the time period for which it will default. It also invoked the FM clause and said, “No cause of action for breach or liability or procurer event of default will arise as a consequence of force majeure event.”

Several group of renewable power producers had requested the Centre to clarify to the states on scheduling of renewable power and payment for the same. The union ministry of power last week allowed power distribution companies (discoms) to defer payments to power generators (gencos) and transmission companies (transcos) in wake of delayed payments by electricity consumers.

The ministry has asked the Central electricity regulatory Commission (CERC) to provide three months moratorium to discoms for paying to gencos & transcos. However, the CERC is yet to issue any notice on the same.

At the same time, the developers have cited the moratorium has not been given on payment by discoms to gencos. Rather it is on the late payment surcharge in case of delayed payment by the discom.

In the letter to the CERC, power ministry has asked it to specify reduced rate of late payment surcharge for payment which become delayed beyond a period of 45 days. It also allowed the discoms to claim relief against its obligations to pay late payment surcharge to gencos. Business Standard has reviewed the letter issued on 28th March.

RE power producers however in their letter to the Centre asked the government to issue a clarification against its earlier notice that there is no moratorium on payments to be made by the discoms to the generators and “thereby should pay the RE players, considering their must run status.”

“The Centre should direct the discoms to pay all the outstanding amounts till date to renewable power generators and Ensure sufficient funds available in MNRE’s Payment Security Fund (PSF) to make timely payments, and quick access for SECI & NTPC, in case of non-payment from discoms,” said the letter by Indian Renewable Energy Alliance.

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