PSUs may sell 50% of hydel power locally

The government is considering allowing state-owned power companies such as NHPC and Satluj Jal Vidyut Nigam (SJVNL) to sell up to 50% electricity generated from their hydel power plants to respective home states where the projects are located. Local allocation could go up to 100% in exceptional circumstances with the approval of the minister of power, a government official said.

The move aims at providing level playing field to government companies so that they are able to compete with private hydel project developers who bag several hydel projects from state governments offering higher power allocations locally. Most of the states are energy hungry and need assured supply from local power producers.

Under the present regulations, central public sector enterprises (CPSEs) in hydel sector can only allocate a maximum of 30% of power from single project to home state. This includes 13% (including 1% for local area development) of power, which the home state gets as free power and balance from its share decided on the basis the central plan assistance given to the state during previous five years based on consumption of electricity.

“The home state share from CPSEs is much lesser than what private generating companies are willing to offer to them by way of higher percentage of saleable power, upfront premium and other incentives. Consequently, several projects have fallen out of CPSEs hands and landed in favour of private companies,” said an official of the power ministry asking not to be named.

“The change in allocation with CPSEs offering higher share of power to home state could help in creating a more competitive environment,” the official said adding that the proposal was still being discussed in the ministry. The proposed changes will be applied prospectively and will not alter allocation made by existing hydel projects. The proposal has also been endorsed by the Central Electricity Authority (CEA).

As per the proposal, hydel projects being undertaken by state-owned companies can allocate more power (up to 50% of saleable energy) to home state.But, the quantum will be determined on the basis of state’s electricity demand projections, paying capacity of its utility and willingness of state to enter into long term power purchase agreement (PPA) at regulated tariff. The share of free power in this (50%) will remain 13% as per existing norms. Of the balance 50% of power from these projects, 15% will be the Centre’s unallocated quota, up to 40% would be allowed for sale on merchant basis by the CPSE and balance 45% would be allocated to other beneficiary states in the region on the basis of the Gadgil formula.

The changes will impact central hydel companies such as NHPC, SJVNL, Damodar Valley Corporation (DVC) NEEPCO, Tehri Hydro Development Corporation (THDC) who are facing the heat from private sector companies. In case of NHPC, it has lost projects even though the company finalised DPRs for hydro projects like Middle Subansiri (to Jindal Power), Siyom and Siang in the North East. While allocation of power is generally made as per laid out formula for CPSEs, few exceptions are present especially in joint sector projects where CPSEs is jointly developing the projects with state governments. Few exceptions have also been given in the case of the North East with region getting higher share of allocation.