ISLAMABAD: The Federal Government on Wednesday hinted at taking over K-Electric (KE) as disputes are not inching towards any resolution due to rigid stance of the two protagonists, well informed sources told Business Recorder. This was the crux of the discussion held at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Minister Shaukat Tarin. Dispute on Terms of Reference (ToRs) of arbitration between KE and public sector organisations is also a headache for the Privatisation Commission. The ECC discussed the following issues: (i) non-adjustment of subsidies against transfer price; (ii) enhancement of capacity to 1400MW on firm and pro-rata basis; (iii) SBLC backed with escrow arrangement for replenishment of SBLC upon encashment or grant of access by KE to its MCA on equal basis with its lenders; (iv) MDI recorded on non-coincidental basis till the entire system is established on co-incidental basis; (v) KE to be treated at par with the other Discos and to share shortfall in power, if any, with the rest of the country under N-1 contingency; and (vi) draw of additional 350-450MW by KE from NTDC may be allowed till May 30, 2021 and formal PPA signed on the basis of approved terms and conditions
Sources said Cabinet Committee on Energy (CCoE) in its decision of August 27, 2020 directed that “KE and NTDC should start taking necessary actions for transmission arrangements for supply of additional 350-450MW immediately to ensure availability of power supply to Karachi in time for meeting its power demand during peak summer season starting from March 2021”.
The CCoE approved an additional supply of 1300MW from the national grid to KE on June 19, 2020. The CCoE on August 27, 2020 further reviewed different aspects of additional supply of 1300MW to K-Electric and took the following decisions: (i) KE, CPPA and NTDC will initial the tripartite Power Purchase Agreement (PPA) for additional power supply of 350 to 450MW within one-week while keeping the financial settlement clauses in square brackets in CPPA-Gs proposed-language; and (ii) Finance Division and Power Division to expedite action for finalization of clause(s) related to financial settlement and submission to the ECC.
The sources said multiple meetings were held between KE and CPPA to finalize tripartite PPA for additional supply to KE. The disagreement on various clauses of the proposed PPA, however, could not be resolved.
Pursuant to the CCoE decision, KE is drawing additional 350MW from national grid in addition to 650 MW to meet the emergent demand during the month of Ramazan sans approval of CCoE.
Power utility is said to be collecting bills from consumers but is not making payment to CPPA-G, which the government, now regards as not acceptable. KE has also been accused of using political stunts which is why the government could not disconnect supply despite the fact that its receivables are building up with every passing day.
Some of the ECC members argued that Power Division should discontinue power to the KE due to non payment. However, some members argued that discontinuation is not the solution to this issue; the government should go a step further.
“One of the key members of the ECC recommended that the KE’s case may be taken up with the Cabinet and government should immediately ‘take it over’,” the sources added. The power utility has to pay Rs 212 billion to CPPA-G. KE is making current payments to SSGC and PSO against gas and fuel supply bills but not to CPPA-G.
Though, the ECC has constituted a committee under the chairmanship of Finance Minister, Shaukat Tarin, to make last-ditch effort to sort out things with KE, the actual decision is that the government should take “considerable action” which sources elaborated is to “ take over” the power utility. Other members will be Minister for Planning, Development and Special Initiatives, SAPM on Power and Planning, Secretary Power.
The sources said, K-Electric maintains that the additional capacity to be provided under the agreement may be increased from 1300MW to 1400MW. Power Division has supported the proposal of KE.
According to an official statement, Power Division presented a summary before the ECC regarding release of first installment of payment to IPPs. Secretary Power Division briefed the Committee about the recommendations of the sub-committee constituted during ECC last week.
The ECC approved payment of first installment to 35 IPPs out of total 47 whereas payment to the remaining 12 IPPs (under Power Policy 2002) may be withheld owing to the NAB investigation.
Secretary Power gave a detailed briefing to the Committee regarding a draft summary for approval of arrangement for providing additional power from NTDC to K-Electric since April 2020. The Secretary Power also raised the issue of non-payment for the additional power supply by K-Electric to Power Division. After a detailed discussion, the ECC constituted a Sub-Committee comprising Federal Minister for Planning, Federal Minister for Energy, Federal Minister for Maritime Affairs and SAPM on Power to be headed by the Finance Minister to negotiate with the Karachi Electric for settlement of payment dispute amicably.
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