The Hindu Business Line : 4 gas-based IPPs to gain from open sale of 20%

Four independent gas-based power producers (IPPs) – GVK Jegurupadu extension, Vemagiri, Konaseema and Gauthami – are likely to benefit from the recent decision to allow them to trade 20 per cent of the generated power in the open market.

Based on representations of these four IPPs to allow them to trade 20 per cent of power, the Andhra Pradesh Energy Department has accorded permission to these four IPPs through an order passed recently.

However, it is to be seen if the independent regulator, the Andhra Pradesh Electricity Regulatory Commission (APERC), will endorse this as it has financial implications on the State and also on the consumers.

The 220 MW GVK Industries owned Jegurupadu, 370 MW Vemagiri Power, 464 MW Gauthami Power and 445 MW Konaseema EPS Oakwell Power, had petitioned the AP Government to permit them to trade 20 per cent of the power generated, as they faced hardship from lack of gas supply for nearly three years.

During this period, these four projects had to bear the additional debt service cost and also delays in commissioning the project. This meant that the power purchase agreements would have to be recast.

A bonanza

The move would enable these IPPs to trade at market determined rates which could go up to Rs 8-9 a unit depending on the demand-supply situation as against the committed supply at Rs 2.80 per unit to the AP Transco.

With the recent Government order issued by Mr A.K. Goel, Special Chief Secretary to the Government, which is subject to independent regulator’s nod, these IPPs would be entitled to third party sales, which would offer them higher returns.

However, experts contend that this move would cast a heavy burden on the State energy consumers. With the Government facing shortage due to lower generation from hydel units, it will have to purchase unallocated power from Central stations or from IPPs at market rates, which could be high.

It is conservatively estimated that additional purchases could cost up to Rs 1,400 crore a year. This burden will eventually have to be borne by the end consumer. The final decision on the 20 per cent largesse rests with the regulator.

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