CERC cuts late payment surcharge on discom dues to gencos, transcos

New Delhi, Apr 3 () Power sector regulator CERC on Friday ordered reduction in late payment surcharge (LPS) payable by discoms to generation and transmission companies 1 per cent per month from the earlier 1.5 per cent for delayed clearance of dues amid coronavirus lockdown.

Power generation companies (gencos) and transmission utilities (transcos) charge LPS from discoms for delayed payments of bills beyond 45 days.

"If any delayed payment by the distribution companies to the generating companies and inter-state transmission licensees beyond 45 days from the date of the presentation of the bills falls between 24.03.2020 and 30.06.2020, the concerned distribution companies shall make the payment with LPS at the reduced rate of 12 per cent per annum that translates into 1 per cent per month," the Central Electricity Regulatory Commission (CERC) said in a suo motu order on Friday.

Earlier on March 28, the Ministry of Power had issued directions to the CERC to provide a moratorium of three months to discoms to make payments to generating companies and transmission licencees and not to levy penal rates of LPS.

The ministry had also asked state governments to issue similar directions to state electricity regulatory commissions.

The ministry had pointed out in its statement that due to the lockdown, consumers are unable to pay their dues to the discoms.

This has affected the liquidity position of the discoms thereby impairing their ability to pay to the generating and transmission companies, it had said.

In this context, Power Minister R K Singh has approved significant relief measures for power sector, it had stated.

The ministry took a slew of measures in view of lockdown till April 14 to contain COVID-19.

In the 2019 CERC Tariff Regulations, the rate of LPS which is applicable beyond 45 days from the date of presentation of the bill is 1.5 per cent per month (which translates to 18 per cent per annum).

This order also clarifies that if the period of 45 days beyond the due date of the presentation of the bill by the generating companies or inter-state transmission licencees, as the case may be, falls before 24.03.2020 or after 30.06.2020, the concerned distribution company shall be liable to pay the LPS as per CERC's 2019 Tariff Regulations i.e. 18 per cent per annum.

The cut in LPS will be applicable on gencos and transmission utilities which have signed cost-plus basis agreements with discoms. In these cases tariff is decided by power regulator on basis of estimates submitted by the gencos.

In case of power purchase agreements signed on tariff-based competitive bidding, the reduction in LPF for payment delayed beyond 45 days during March 24 to June 30, will be claimed under in the force majeure clauses.

Commenting on the order, Pratik Agarwal, Managing Director, Sterlite Power, said, "As the nation grapples with the impact of Covid-19, the CERC order is a welcome move as it announces no moratorium on monthly tariff payments due to gencos and transcos.

This will ensure smooth functioning of the entire power sector and avoid liquidity issues at this important hour where grid security is of utmost importance."

"The reduction in late payment surcharge from 1.5 per cent per month to 1 per cent per month will provide much needed relief to discoms. We are thankful to CERC for considering the financial sustainability of the entire power sector value chain and bring out a balanced order during these trying times." KKS MKJ