CHENNAI: TANGEDCO’s lack of action in terminating a power purchase agreement with PPN Power Generating Company resulted in unnecessary payments of Rs 453.04 crore and additional liabilities of Rs 360.20 crore, according to CAG report for the year ending March 2021.
The report said Tangedco had entered into a power purchase agreement with PPN in January 1997 for the supply of 330.5 MW power for 30 years from the date of commercial operation. The agreement stipulated a fuel mix of gas and naphtha in the ratio of 70:30. However, due to a delay in the availability of gas, Tangedco consented to the use of 100% naphtha (a higher-cost fuel) until natural gas became available.
“Based on the directives of the Central Electricity Authority and consequent request from TNEB, PPN submitted an undertaking to limit the fuel supply agreement to 15 years. Accordingly, Tangedco accorded approval for 15 years in August 1998,” the report said.
PPN executed the project and the plant achieved commercial operation in April 2001. Tangedco purchased power from PPN up to June 2016 and made payments as per the terms. Upon completion of the terms of the agreement, PPN requested in August 2016 for an extension of the agreement to operate the plant with naphtha for another five years. Tangedco gave permission to use naphtha as an alternative fuel as a temporary measure.
Tangedco had decided in February 2018 not to extend the agreement with naphtha as fuel and resolved to file a petition before Tamil Nadu Electricity Regulatory Commission seeking to direct PPN not to declare availability without a valid agreement.
However, PPN continued to submit invoices for fixed charges beyond June 2016 and its total claim up to April 2021 was Rs 813.24 crore. Audit noticed that despite the board’s decision to not extend the agreement, Tangedco neither terminated the power purchase agreement nor filed a petition before TNERC.
It paid a sum of Rs 2,453.04 crore to PPN between March 2020 and November 2021 on ad hoc basis against bills raised by PPN from April 2016 to April 2021. The report highlighted Tangedco’s failure to take legal action or issue default notices in accordance with the power purchase agreement, leading to additional liabilities of Rs 813.24 crore.