The Union Power Ministry on Thursday, August 18 barred 13 states from buying or selling electricity from the spot market for not clearing pending payments of Rs 5,085 crore to power generators. Among the power distribution companies on the ban list, discoms of Karnataka, Tamil Nadu, Andhra Pradesh and Telangana are also included. Spot market for electricity is where the electrical energy is traded for immediate physical delivery and where power supply and demand are matched instantaneously. Here are a few things to know:
Power discoms often buy electricity from the spot market to meet immediate power needs. With the 13 states not allowed to purchase power from Thursday midnight, industry experts have said that the government’s decision to ban these states from buying power could result in power outages in the short term in some areas, according to Moneycontrol. This is possibly the first time that such a high number of states have been prohibited from buying power at the same time.
Telangana was listed as the highest defaulter with dues worth Rs 1381 crore, followed by Tamil Nadu (Rs 926 crore), Andhra Pradesh (Rs 413 crore) and Karnataka (Rs 355 crore), according to Business Standard. However, Telangana officials have claimed that the state paid all its dues of around Rs 1,380 crore on Wednesday itself, and said it was unclear why Telangana has been included in the list of defaulters. TS Genco Managing Director Devulapalli Prabhakar Rao told Deccan Chronicle that the state has cleared all its dues with power generators.
On Friday, the Andhra Pradesh government also said that the orders do not apply to the state as it has already paid the dues. According to IANS, Special Chief Secretary (Energy) K Vijayanand said the state has cleared all its dues towards electricity purchased from the power exchange, and that discoms of the state have paid dues of Rs 350 crore. "The restriction will not apply to Andhra Pradesh. The state was included in the list due to some communication gap," he said, adding that the state had now been removed from the list by the Union government.
This is the first time that the Power System Operation Corporation (Posoco), a body of the power ministry, invoked the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 to stop the power distribution companies (discoms) from alternative short-term sources, as per reports. According to the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, which were notified in June this year, discoms are required to pay a late payment surcharge (LPS) on the outstanding amount after the due date of payment. Shailendra Dubey, the chairman of All India Power Engineers Federation, has reportedly said that Posoco is implementing provisions of the Electricity (Amendment) Bill 2022, which has been referred to the Standing Committee and could not be passed in the Lok Sabha.
For every month of delay, the rate of late payment surcharge for the successive months of default will increase by 0.5 per cent, with the condition that the late payment surcharge will not be more than 3 per cent higher than the base rate at any time. Reports say that any further delay would invoke penalty provisions, including a total ban on buying short-term power from the spot market and subsequently regulation of medium-term and long-term power supply.