Lanco among six that risk losing D6 gas supplies

Vol 15, PW 7 (06 Oct 11) People & Policy

Six privately-owned power stations in Andhra Pradesh risk losing their D6 gas allocation unless they agree to sell electricity at government-regulated rates under radical new plans being considered by the government.

In a letter dated September 26, oil ministry joint secretary marketing Vivek Kumar asks his power ministry counterpart IPC Kesari for comments on the proposal. If approved, it could spell trouble for power stations allocated D6 gas by the Empowered Group of Ministers (EGoM) in November 2009, but which have yet to sign Power Purchase Agreements (PPAs) with AP Transco.

Lanco Infratech is a good example. Lanco today receives 1.46m cm/d of D6 gas at its 734-MW Kondapalli station in Andhra Pradesh, but wants to ‘divert’ this gas to commission a 770-MW expansion.

Kumar says Lanco operates Kondapalli as a ‘merchant’ power station even though it pays only $4.2/mmbtu for inexpensive D6 gas. Bangalore-based GMR Group likewise sells electricity from its ‘combined cycle’ 220-MW Tanir Bavi power station at high rates despite receiving 880,000 cm/d of D6 gas.

Both, says Kumar, “sell power during the peak season to private entities at an average price premium of Rs2/unit compared to regulated rates.” Kumar also accuses four other Andhra stations, which have yet to sign PPAs: a 32.7-MW station near Nandigama, owned by RVK Energy, with a D6 allocation of 25,000 cm/d; a 30-MW station near Chigurukota village, owned by Sriba Industries, with a D6 allocation of 120,000 cm/d; a 55-MW station near Pendurthi village owned by LVS Power, with a 220,000 cm/d allocation; and a 35-MW station promoted by Silkroad Sugar at Vakalapudi village, with a 100,000 cm/d allocation.

None of these four stations yet receive D6 gas or generate electricity and if they don’t sign PPAs soon they most likely never will.