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State discoms end Force Majeure period, restart power purchases

However, private power companies have started exploring legal options to contest non-payment of fixed charges by states for about 60 days of the force majeure event, sources said. In the absence of consensus among state distribution companies and power plants, power industry expects a fresh round of litigation.

, ET Bureau|
Last Updated: Jun 03, 2020, 09.05 AM IST
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The power companies have said less demand due to Covid-19 pandemic does not qualify under the force majeure events listed in power purchase agreements with distribution companies.
New Delhi: With electricity demand picking up, state power distribution utilities are ending the force majeure period and have restarted power purchases they had earlier suspended.

However, private power companies have started exploring legal options to contest non-payment of fixed charges by states for about 60 days of the force majeure event, sources said.

Senior officials in private power firms said they have begun seeking legal opinions for sending notices to power distribution companies as power bills for supply in March have started getting due.

In the absence of consensus among state distribution companies and power plants, power industry expects a fresh round of litigation.

The power companies have said less demand due to Covid-19 pandemic does not qualify under the force majeure events listed in power purchase agreements with distribution companies.

“States invocation of force majeure clause to avoid paying fixed cost is flawed as electricity generation, transmission and distribution has been declared essential activity,” Association of Power Producers director general Ashok Khurana said.

He said the government asking central power generating stations to voluntarily consider giving rebate on fixed cost for lockdown period clearly shows that fixed cost is payable during this period.

The power ministry last month asked central power generators and transmission companies to offer a one-time 20-25% rebate on fixed charges to distribution companies for the initial 40-day period of lockdown. Distribution companies of states including Madhya Pradesh, Telengana, Punjab, Haryana and Uttar Pradesh invoked force majeure event beginning last week of March, citing reduction of electricity demand due to the nationwide lockdown.

Electricity demand dipped to as low as 2,600 million units, down 28% year-on-year, during the lockdown. It gradually grew to about 3,800 million units till May 26 due to reduced lockdown restrictions on industries. However, towards the end of May, it started to decrease due to rains across India. Power demand touched 3,193 million units on May 31 and stood at 3,247 million units on Monday.

They utilities told the power plants that their electricity will not be scheduled and the projects should stop declaring availability of electricity. They also denied paying fixed charges to power plants during the period of force majeure.

The power companies had earlier responded to force majeure notices issued by the distribution companies



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