Making Karachi loadshedding-free: PD seeks Nepra's nod on proposed NTDC-KE IA deal

ISLAMABAD: The Power Division (PD) has sought nod of the National Electric Power Regulatory Authority (Nepra) on the proposed Inter-Connection Agreement (IA) between NTDC and KE, to achieve the dream of making Karachi, the country's business hub, a load-shedding free city by 2023, sources in Nepra told Business Recorder.

The Cabinet Committee on Energy (CCoE), in its meetings, held on June 19, 2020 and August 27, 2020, while considering the availability of surplus power in national grid abandoned the KE's proposed 700-MW Datang Coal Project and approved supply of additional power to the KE from national grid, in addition to existing supply of 650 MW.

In this regard, CCoE directed the Power Division, CPPA-G and NTDC to enter into the necessary agreement with KE for the additional power supply besides a PPA being negotiated between CPPA-G and KE.

In pursuance to the decisions of CCoE, NTDC and KE under Power Division held a series of meetings to deliberate and finalise the draft Implementation Agreement (IA), to be signed between NTDC and KE with respect to supply of power to KE from the national grid. However, some issues remained unresolved and required guidance from Nepra for resolution in line with applicable laws and regulations.

Manager Director, NTDC, in a letter 3/3/3/TO on October 6, 2021, stated that they have almost finalized the IA; however the following two issues remain unresolved and require guidance from Nepra for resolution in line with the applicable laws and regulations: (i) firm capacity of 1,100 MW and 2,050 MW (2023); and (ii) cost of NTDC interconnection works.

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According to KE, it was in the process of setting up the project for which land was also purchased in 2016 and further envisaged procurement of power through a 450 MW RLNG plant with Engro and another 350 MW coal power plant to meet the additional demand of up to 1400 MW by 2023-24. However, in view of the instructions given by GoP to KE to purchase excess power available in the national grid in the national interest, as further outlined in the decision of CCoE's meeting of June 19, 2020, KE abandoned projects following the GoP directives in lieu of additional 1400 MW from national grid.

KE has conveyed its desire and commitment to move towards a no-load shedding regime and aims to achieve this objective by 2024-25. Hence, it is imperative that the agreement being finalized between parties ensures supply of firm base load capacity of 2050 MW to KE.

The power utility argued that any reduction in such firm supply of KE by NTDC would result in unannounced load shedding for consumers of Karachi and will also unduly affect the reputation and cash flows of the utility.

With respect to firm/ base load capacity, NTDC maintained that in case of shortage of power in the power pool, NTDC in order to manage demand across country will not supply power to KE at firm capacity as per stated requirement and will subject KE to load shedding on pro-rata basis at par with other Discos. Therefore, NTDC's stance is that any such commitment under the agreement may result in non-compliance of the grid station.

However, KE stated that existing NTDC grid code was approved by the Authority in June 2005, prior to privatisation of KE when demand management was considered as a whole keeping in view all existing Discos including KE (which was government owned prior to privatisation). As post-privatisation demand management of KE is not being done by NTDC; therefore, clauses related to demand management under the existing grid code are not applicable to KE as the demand/ load management is being done by KE in its licensed territory. Therefore, NTDC's review on non-compliance of grid code due to firm capacity is not valid.

KE has also clarified to Ministry and NTDC that in case firm capacity of 2050 is not possible due to possible shortfall in national grid then NTDC may commit lesser number as base-load capacity so that KE can plan for the shortfall accordingly.

KE has further stated that if NTDC lowers the firm capacity of 2050 MW, the power utility will have to plan for its own power plant to meet shortfall and Nepra Authority and GoP will have to provide its approval as soon as possible.

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NTDC should ensure firm supply of 2050 MW or lower, as the case may be, so that KE can plan accordingly to meet its growing demand, the sources quoted KE as saying.

NTDC contended that it can dispatch the requested capacity to KE as per the following schedule: (i) summer 2021 - 1,100 MW ;(ii) summer 2022 - 1,100 MW and summer 2023 and onward - 1,100 MW or 2050 MW will be subject to the completion of KKI grid station.

However, the value of capacity can be agreed subject to the condition that in case of emergency, operating constraints, shortfall in generation and / or transmission capacity due to any reason (i.e. tripping, force majeure event, or any sort or outage/ unavailability of generation, fuel shortage, faults, transmission capacity outage), KE will be supplied with the capacity according to pro-rata basis with other users (i.e. Discos, BPCs etc) as per grid code and in such event capacity supply agreed with KE will be applicable.

With regard to KE's point of view on non-applicability of clauses pertaining to load management of grid code to KE, NTDC has further apprised that as per KE transmission licence of June 10, 2010, the grid code applicable on KE in the NTDC's grid code, KE has to operate with dispatch instructions on NPCC/ SO regarding 220 KV and above transmission lines and as per clause 18(e) of Nepra Act, the National Grid Company i.e., NTDC is system operators. Further article 5 of the Transmission Licence of NTDC of December 31, 2002(modified by the Authority on May 29, 2015) gives exclusive right to National Grid Company to operate transmission facilities of a special purpose transmission licencee pursuant to Section 19 of the Nepra Act.

On the issue of cost of NTDC interconnection works, KE noted that under the draft of the ICA currently under discussion the following two new interconnection lines are required to be developed to enable off-take of up to 2050 MW from national grid to KE: (i) 220 KV double circuit transmission line for looping in/out of Jhimpir-2- Jhimpir/ DSEZ(Gharo) single circuit at 220 KV Dhabeji Grid Station; and (ii) 500 KV double circuit transmission line for looping in/out of the planned 500 KV (K2/K3 plant) to Port Qasim coal-fired power plant single circuit at KKI Grid Station.

KE has argued that the responsibility of constructing the transmission line up to the point of connection as defined within the Grid Code lies with NTDC. OC 4.2 of the Grid Code clearly spells out the responsibility of NTDC with respect to battery limits and mentions that network bifurcation points between NTDC and Disco's network, and the same principles shall be applied for interconnections with KE. The same principle is being followed for all the existing interconnections whereby all the transmission lines till Jamshoro interconnection, metering is done at KDA Grid and 220 KV transmission line from charges duly paid by KE as per the applicable regulations.

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The power utility further says that since the transmission network of overhead and underground lines of 500 kV in KKI and 220 kV in Dhabeji Grid Station and 500/220 kV transformers would be NTDC assets, these should also be constructed by NTDC for inclusion in their assets. Moreover, the cost incurred by NTDC on these interconnection lines will form part of NTDC's asset based and NTDC will also earn return on this investment in the form of Use of System Charges (UoSC).

On this issue, NTDC says cost of construction of interconnection lines shall be borne by KE, since the system in question will only benefit KE; hence, the power utility should pay for it as Discos and KE also recover this cost from their consumers. NTDC has shared some grid code clauses in support of its position.

According to Power Division, the cost of assets (these assets do not include the existing transmission connection points) at the point connection including materials, civil works, cost of land and other ancillary costs shall be borne by the applicant. However, NTDC shall provide a preliminary cost estimate for the new connection. Moreover, Article 10, 111, 12 & 13 refer to NTDC's position regarding connection charges.

Power Division states that since signing of ICA is necessary for implementing the arrangements, Nepra being the regulator for both licencees i.e. NTDC and KE, should give its views in terms of Article 37 of NTDC licence on both contentious issues so that the agreement may accordingly be finalized.

Power Division has assured that as the ICA is finalised, it will be submitted to Nepra for approval under Article 9 sub-Article 2 of the NTDC licence.

Copyright Business Recorder, 2021