Punjab Decides to Reduce Late Payment Surcharge for DISCOMs to 6% Per Annum

Due to the ongoing lockdown as a result of the Coronavirus (COVID-19) outbreak, the Punjab State Electricity Regulatory Commission (PSERC) has provisionally reduced the rate of late payment surcharge (LPS) to 6% per annum if the due date falls between March 24, 2020, and June 30, 2020.

The late payment surcharge will be paid by Punjab State Power Corporation Limited (PSPCL) to the generating companies and Punjab State Transmission Corporation Limited (PSTCL).

The Commission has now invited comments, suggestions, and objections from stakeholders and the public on the reduced rate of LPS. The last date for the submission of comments is April 30, 2020, which can be sent through an email. The next date of hearing has been set on May 7, 2020, at the Commission’s office.

Background


On March 30, 2020, the Government of Punjab issued directions to Punjab State Electricity Regulatory Commission that it may specify a reduced rate of the late payment surcharge for payments, which are delayed beyond March 24, 2020, to June 30, 2020, to power generators and transmission licensee.

In its letter to the Commission, the government of Punjab stated that despite the lockdown, the entire workforce of the power sector is working round the clock to keep “all homes and establishments energized.”The state government also noted that due to the unprecedented situation which is likely to continue, the consumers are unable to pay their dues to the state distribution companies (PSPCL),  which makes them unable to pay to the generating and transmission companies.

“PSPCL has to make regular payments on account of coal cost to coal companies, railway freight, salary, pension, and power purchase agreements,” the government added.

Referring to the central government’s recent order to the Central Electricity Regulatory Commission (CERC) to provide a moratorium of three months to the DISCOMs, the Punjab Commission added that the state DISCOM had extended the due date for the payment of electricity bills to April 15, 2020. The date has been extended for all domestic and commercial consumers whose current bills are up to ₹10,000 (~$121).

The government also noted that there would be no disconnection of small and medium supply industrial consumers up to April 15, 2020, on account of the non-payment of the current electricity bills.

Interim order by Punjab Commission

The Punjab State Electricity Regulatory Commission has clarified that if the period of 60 days beyond the due date of presenting the bill by the generating companies or PSTCL, falls before March 24, 2020, or after June 30, 2020, then the power corporation will have to pay the late payment surcharge in line with the state’s Tariff Regulations 2014 and 2019.

According to Regulation 31 of the PSERC Tariff Regulations, 2014 and 2019, “In case, the payment of any bill for charges payable under these Regulations is delayed by a beneficiary beyond a period of 60 days from the date of billing, a late payment surcharge at the rate of 1.25% per month or part thereof on the unpaid amount will be levied by the generating company or transmission licensee, as the case may be.”

Now, for those generating companies whose tariff has been adopted by the Commission, the DISCOM may claim the relief for payments that are delayed beyond the given relaxation period as per the force majeure provisions given in the respective power purchase agreements. A force majeure is declared in the event of unforeseeable circumstances that prevent parties from fulfilling a contract.

Just a few days ago, given the ongoing lockdown in the country due to Coronavirus (COVID-19), the Central Electricity of Regulatory Commission (CERC) reduced the rate for late payment surcharge payable by distribution companies to power generators. The LPS is now reduced to 12% per annum from the earlier 18% if the due date falls between March 24, 2020, and June 30, 2020. According to the CERC, if there’s any delay in the payment to the generating companies (GENCOs) and inter-state transmission licensees beyond 45 days from the date of presentation of the bills (between March 24, 2020, and June 30, 2020), then the DISCOMs can make the payment of LPS at a reduced rate of 1% per month instead of 1.5%.

Earlier, the Ministry had asked the Commission to specify a reduced rate of LPS, which is delayed beyond a period of 45 days from March 24, 2020, to June 30, 2020, to generating companies and licensees. The LPS will be applicable for delayed payments until June 30, 2020, and the surcharge should not be more than the cost the generating companies or transmission licensees would have to bear because of the delayed payment, the Ministry had proposed.

Meanwhile, the Ministry of Power recently issued a clarification regarding letters of credit to be given by DISCOMs. It stated that DISCOMs are expected to deposit LoCs for 50% of the cost of power they want to be scheduled, while the remaining 50% will have to be paid within 45 days of the presentation of the bill or as specified in the PPA. If the payment is not made as specified, the late payment surcharge will apply.

Currently, the whole world is tackling the deadly Coronavirus, and its repercussions are being felt across industries. You can track all the latest developments and the impact of the COVID-19 pandemic on the renewable industry here.