In an attempt to bridge the power deficit — now 4,000 MW, but growing quickly — in the State, the Tamil Nadu Generation and Distribution Corporation Ltd (Tangedco) has decided to award a long term power purchase contract for 1208 MW to four companies at a levelised tariff of Rs 4.910/Kwh for a period of 15 years.

According to informed sources, the impetus for this move comes from State Chief Minister Jayalalithaa herself.

The good news for private power producers is that she is learnt to have given further instructions that the entire 4,000 MW power deficit must be bridged in mission-mode through urgent award of similar competitive contracts to private power producers for the remaining power shortfall of 2,222 MW within the next 4 months.

Since Tamil Nadu doesn’t have its own coal, it is keen to rope in private power producers with preferential coal linkages or captive coal mines to generate power for the state. The decision to award the contract at Rs. 4.91/Kwh when the cost of production is far lower, displays the state’s willingness to pay a premium for power generation.

The minutes of the 38th Tangedco Board meeting held on June 28 record a resolve to issue letters of intent for this particular long term power purchase contract to DB Power, Jindal Power, Ind Bharat Energy (Utkal) and Balco.

Of a total of 12 bidders, these four companies are said to have submitted the lowest bids. As per the document, DB Power submitted the lowest levelised tariff of Rs 4.910/Kwh. Minutes from relevant files show that, after negotiation, DB Power offered an additional rebate of Rs. 0.02/unit for the first five years of power generation. The other three bidders have agreed to match DB Power’s levelised tariff with the additional rebate.

“The final negotiated levelised tariff is comparable with similar long term tenders finalised by Uttar Pradesh, medium term tender awarded by Tangedco, and provisional tariff of our joint venture Unit-II at Vallur, and hence considered reasonable and acceptable,” the minutes record. The total available capacity for Tamil Nadu is a little over 10,500 MW, excluding wind power, but the peak demand is forecast to be some 15,700 MW for 2013-14. Tangedco’s chairman and managing director adds that capacity addition from all ongoing projects commissioned during 2013-14 may only take care of the existing gap of 4,000 MW in supply. “We need to procure additional capacity for next three years viz, 2014-15, 2015-16 and 2016-17, which on a conservative estimate will be of the order of 3000 MW at the rate of 1000 MW per annum since no new significant capacity addition is expected during these years from 2014-15 to 2016-17”.

The Board has estimated a requirement of roughly 2000 MVA for withdrawing the 40% power cut now being imposed on High Tension Industrial and Commercial consumers. “Continuance of Restriction and Control measures on Industrial and Commercial consumers is directly affecting the revenues of Tangedco since they are the most remunerative consumers of Tangedco,” it observes.