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The government has asked power utilities to sign power purchase agreements (PPAs) with power generators after selecting them through reverse auctions and has engaged MSTC to create an e-auction platform for bidding and deciding on lowest cost power supplier.
If a state intends to buy power, either for long, medium or short term, they will now have to invite bids from power suppliers. The bidding would be conducted through MSTC's e-auction where the buyer will set the maximum price and the bidder who manages to offer power at the lowest price would be the winner with which the state utility will sign the power purchase agreement. "These agreements can be for as short as a month to 25 years. MSTC hopes to ready the short-term platform for eauction by January. The one for medium and long term is expected to be ready in three more months," said SK Tripathi, chairman and managing director of MSTC.
At present, PPAs are often signed through negotiations on a nomination basis with power producers. In order to bring total transparency in the way power utilities buy power, the government has directed them to conduct price bids through a reverse auction mechanism conducted on an electronic platform. "Public sector e-commerce site MSTC has been assigned the job of developing a national e-auction portal for establishing power purchase agreements by power distribution companies and licensees," said Tripathi.
"The power ministry has issued a standard bidding document for distribution companies and licensees intending to enter into power purchase agreements with power generators and traders on long, medium and short term basis. Power Finance Corporation (PFC), another PSU under the power ministry, will team up with MSTC for developing and operating the National e-Bidding portal," he said.
Following a meeting chaired by the power secretary on Thursday last week, it was decided that the portal shall be made operational by end of January 2016 and the first phase will be implemented for short-term power purchase agreements which means power purchase contracts for more than 15 days and up to one year will be handled through this portal. Thereafter, power purchase contracts for medium term (more than one year and up to five years) will be introduced. Finally, longterm PPAs will be settled through the portal.
The bidding process shall involve multi-stage bidding like online request for quotation, request for proposal and reverse e-auction. "As a national portal, the system is expected to create greater opportunity for the power buyers and sellers and power tariff is expected to become cheaper and more affordable to consumers," said Tripathi. MSTC was earlier appointed by the government to carry out eauctions of coal blocks cancelled by the Supreme Court in September 2014. The fourth tranche of allocation of these coal blocks is presently going on.
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