Islamabad, March 25: The National Electric Power Regulatory Authority (Nepra) has formally launched hearings to approve the revised agreements between Independent Power Producers (IPPs) and the Government of Pakistan (GoP).
These agreements are expected to lead to a reduction in consumer tariffs, benefiting the public with a potential decrease in electricity rates.
Key Points from the Nepra Hearing:
Hearing Session Details:
The hearing was led by Nepra Chairman Chaudhry Waseem Mukhtar, with participation from other board members including Member (Tech) Rafique Ahmad Shaikh, Member (KPK) Maqsood Anwar Khan, and Amina Ahmed. The session began with a briefing from the Central Power Purchasing Agency (CPPA-G), followed by a Q&A session.
IPP Applications for Tariff Reductions:
Several IPPs submitted applications to reduce tariffs in line with the revised agreements negotiated with the government’s Task Force led by Minister for Power, Sardar Awais Leghari. These IPPs include:
- Nishat Chunian Power Limited
- Nishat Power Limited
- Narowal Energy Limited
- Liberty Power Tech Limited
- Engro Powergen Qadirpur Limited
- Saphire Electric Power Limited
- Saif Power Limited
The government has projected a Rs 0.50 per unit reduction in the tariff based on the generation data from these plants in the previous year.
Read More: Nepra Receives Joint Plea of Tariff Reduction From 7 IPPs
Disagreements and Forensic Audit:
However, two IPPs, Halmore and Orient Power, have not agreed to the terms set out by the GoP’s Energy Task Force and are, as a result, subject to a forensic audit.
IPP Representatives’ Stance:
During the hearing, the majority of IPP representatives, either present in the auditorium or participating via Zoom, remained quiet on the joint application presented by CPPA-G CEO, Rihan Akhtar.
However, representatives from Nishat Power and Nishat Chunian indicated that their participation in the revised agreements would depend on the withdrawal of Nepra’s ongoing investigation.
Chairman Nepra clarified that the investigation had been challenged in the Islamabad High Court (IHC), preventing further action by Nepra at this stage.
Request for Adjustments in Fuel Prices:
Representatives from Narowal Energy suggested that a mechanism be introduced to adjust furnace oil prices if there are future price hikes. This is a critical issue as fuel costs significantly impact the cost of electricity production.
Savings from Revised Agreements:
CEO of CPPA-G, Rihan Akhtar, shared that talks with 29 IPPs have been completed and agreements are being finalized with renewable energy projects in the coming weeks.
The revised agreements are expected to result in significant savings of approximately Rs 920 billion for the government.
RLNG Power Plants:
Akhtar also noted that agreements for RLNG-fired power plants have been revised and will be submitted to Nepra for formal approval in the next couple of days.
Claims of Coercion:
When questioned about a letter sent by 10 IPPs to the Prime Minister, in which they claimed they were being pressured to revise their agreements, the CEO of CPPA-G denied any coercive actions.
Also Read: NEPRA Slashes Electricity Tariff by Rs3 Per Unit Under FCA
The IPP representatives, however, chose to remain silent on this matter.
Future Revisions and Components:
Going forward, future working capital components will be indexed at KIBOR + 1% on a quarterly basis.
Additionally, the foreign component of Return on Equity (RoE) and Return on Economic Development Charges (RoEDC) for the Oct-Dec 2024 quarter will be recomputed based on a 17% rate of return, using a fixed exchange rate of Rs 168 per USD.
The revised IPP agreements and the potential tariff reductions are expected to ease the financial burden on consumers while also improving the efficiency and sustainability of Pakistan’s power generation sector.
