A turbulent year for Punjab power sector

Submitted by VK Gupta on Mon, 19/01/2015 - 9:08am

A turbulent year for Punjab power sector

Punjab power sector faced a turbulent year as Punjab State Power Corporation Limited (PSPCL) was haunted by coal crisis, forced outage of its units to pave for the pumping of private sector generation in state grid, APTEL’s rejection of return on equity on inflated equity.
The commissioning of three thermal units in Punjab by private sector makes it a power surplus state at least in 8 months of year but tragedy is that Punjab is neither able to consume power within state or sell power to other deficient states. The result was PSPCL was forced to shut down its units on no demand.
Punjab should be able to consume the surplus power within state by reducing tariff on higher consumption or sell it to power deficit states and its inability to do so should not be a justification to hike the tariff.
It is being pronounced by state politicians and PSPCL that with the addition of 3920 MW power by private sector the power will be available to all categories of consumers at affordable prices and rather tariff will be reduced with the availability of surplus power. The surplus power will attract more attract capital investment leading to fast industrialization of state and moreover tube well connections pending for a decade will become a thing of past .But in the year 2014 nothing sort of this thing happened.
At the start of year Punjab was facing power cuts of various durations despite the tall claims made by politicians of making power surplus state as PSPCL failed to solve coal problem. The state run three thermal plants faced the heat of stoppage of coal supplies by PANEM from April as the coal supplying company was demanding higher prices for coal supplied to thermal plants of state. PANEM meets 60% of the coal requirements of the three thermal plants of Punjab. PSPCL was forced to resort to power purchase on short term basis to tide over the crisis.
The arm twisting by PANEM continued for most part of year and got substantial financial benefits from PSPCL Due to inept handling by PSPCL management coal scarcity was created on one hand and crore of public money was doled out to the firm on other hand. Punjab reeled under power cuts despite purchasing costly power worth 6400 crore during April to Sept. 2014.
The pathetic side of the story is that PSERC’S fuel audit saved Rs. 306 crore annually to the people of Punjab on 12.5 million tons total coal supplied to its three thermal plants in Punjab has been undone through this step taken by PSPCL.
But then came another bolt from blue in September. Supreme court in its historic decision has de-allocated 214 coal blocks and 42 of these would continue to function for the next 6 months to wrap up their operation and these 42 blocks would have to pay an additional levy of Rs. 295 per metric tons of coal extracted to make up for the loss highlighted in the CAG report in the coal scam. The cash strapped PSPCL may feel the financial tremors of de-allocation of its captive coal mines in Pachhwara where coal was extracted by joint venture company PANEM.
The annual financial turnaround projected by PSPCL from loss of ` 1,640 crore in 2010-11 to a profit of ` 261 crore in 201213, ` 256 crore in 2013-14 and an expected profit of ` 170 crore in 2014-15.The profit is based on higher tariff granted by Punjab State Electricity Regulatory Commission (PSERC) and higher subsidy granted by Punjab Government on the basis of higher agriculture consumption. Against the backdrop of lesser subsidy from Punjab Government ,reduced equity and lesser consumption for agriculture sector all the profits may be a thing of past.
The Appellate Tribunal for Electricity (APTEL) has rejected the return on equity (RoE) on inflated equity of Punjab State Power Corporation Ltd (PSPCL ) and Punjab State Transmission Corporation Ltd.(PSTCL) and has directed the Punjab State Electricity regulatory Commission ( PSERC) to re-determine the Rate on Equity and the excess amount allowed to the PSPCL with carrying cost shall be adjusted in the next Annual revenue requirement (ARR ). PSPCL may face financial crisis in next financial year if the APTEL decision is implemented by PSERC.
It may be mentioned that Punjab Government had raised the equity of both power companies in April 2010 in its transfer scheme by including the amount of consumer contribution. The equity was increased from Rs. 2946.11 crore to Rs. 6687.26 crore.

The over dependence on private sector for power generation in Punjab and costly power purchase from them has led to poor performance of all the three state run thermal plants with increased forced outage of units on no demand .
The units of Lehra Mohabatt thermal plant, Ropar thermal plant and Bhatinda thermal plant are facing forced outages to pave way for the continuous running of two units of Rajpura thermal plant and one unit of Talwandi Sabo thermal plant. The private sector units remain operational as long as they have enough coal stock. Now the power consumer will have to bear the brunt of forced outage of thermal units and costly power purchase from private sector power generators.
The generation targets of all the three thermal plants have been reduced this year as compared to last year’s targets just to purchase power from private sector thermal plants. Even the reduced generation targets can be achieved due to forced backing down of thermal units.
This target for Lehra Mohabatt thermal plant for first 9 months period was 5278 million units and the actual power generated was 3663 million units. The plant load factor of thermal plant decreased to 60.33% from last years’ figure of 82.33% during the same time period. The outage due to coal conservation was 4785 hours amounting to 1092 million units. The outage of units on no demand was 2099 hours.
Similarly for Ropar thermal plant the generation target for period ending December was 6584 million units and the generation from Ropar thermal plant was only 5015 million units. Last year’s target for 9 months was 6910 million units with generation of 6276 million units. The plant load factor of RTP units came down to 6032% against last years’ figure of 76.85%.with plant load factor of 60.32%. .The generation loss due to coal conservation was 1274 million units.
The plant load factor (PLF) of Lehra Mohabatt thermal plant has come down to 60.33 % in the current financial year ending December against PLF of more than 81. % during the corresponding period last year. The total outage in 8 months of this year is 6128 hours against last year outage of 2975 hours. The generation loss due to coal shortage is 9131 lakh units. The plant faced outage of 2099 hours due to no demand and 4029 hours outage due to coal shortage
Punjab should have at least 70 % share in the total generation to optimize the grid operation and to lower the cost of power supply. The PSPCL engineers argued that the states share in the generation mix is steadily going down in many states which are adversely affecting the state from the flexibility in grid operations and thus raising the cost of power. The private sector thermal plants are run on the sole motive of profit which is at the cost of the consumers whereas states own thermal projects can be scheduled as per states needs depending on the demand. The engineers stressed that 70-80% of the generation mix should be in the state/ central sector for optimum grid operation. In Punjab all the three new thermal plants at Goindwal Sahib, Rajpura and TalwandiSabo have come in private sector and no new thermal plant has been set up in state sector. All the three thermal plants can be expected to run at 80% plant load factor as the Punjab Government has got coal linkages for these plants as per their capacity.

The cost of power procured is more than cost of generation at PSPCL’s own thermal plants. Average variable cost for all tree thermal plants is Rs. 2.63 per unit with Lehra Mohabatt thermal plant having the least generation cost of Rs 2.36 per unit. The power from private thermal plants at Talwandi Sabo a) and Rajpura is costing more than r Rs 5 per unit and even then private sector companies claim an annual loss of over Rs. 400 crore.
The generation capacity addition under the state sector has been totally ignored in Punjab for last more than a decade and the state is facing lot of contractual problems from the three private sector thermal plants. The execution of the 1320 MW Mukerian Thermal Project under state sector is moving at a snail's pace.

Vinod Kumar Gupta