ISLAMABAD: Korangi Association of Trade and Industry (Kati) has sought forensic, technical, and financial audit of payments being made by the Central Power Purchasing Agency (Guarantee) Limited CPPA-G, the Market Operator, to Independent Power Producers (IPPs).
In a letter to Minister for Power, Sardar Awais Khan Leghari, Kati President raised the issue of financial and technical transactions between the CPPA-G and IPPs, saying that recent reviews of Fuel Charges Adjustments (FCA) and Quarterly Tariff Adjustments (QTA) have highlighted significant concerns about the transparency and accountability in the verification processes conducted by CPPA-G for IPP payments.
According to Kati, it has come to its notice that Nepra, during these adjustments, does not always fully verify the backend details of the invoices submitted by CPPA-G and, as indicated in several orders, relies substantially on the data provided by CPPA-G without conducting an independent verification of the invoices or payments made to IPPs.
An extract of January 17, 2023 of decision of the Authority in the matter of requests filed by Discos for periodic adjustment in tariff for the 1st Quarter of FY 2022-23 has also been shared which clearly indicates that Nepra did not conduct a thorough verifications of CPPA-G’s claims and supporting data, instead replying directly on the submission made by CPPA-G.
Kati maintains that given that the CPPA-G acts as the central point of collection and disbursement for IPP-related payments, including fuel costs, energy charges, and capacity payments, the procedures for verifying and approving these payments must be scrutinised. There is currently a lack of clarity on how CPPA-G ensures the accuracy and prudence of the invoices submitted by IPPs, particularly with regard to fuel consumption, heat rates, and other operational data that influence payments. It is essential to ask whether the processes for validation and verification are robust enough to guarantee that all payments made to IPPs are transparent, prudent, and in the best interests of both the government and the consumers.
The key questions include: (i) what are the standard procedures followed by CPPA-G to verify the invoices submitted by IPPs? (ii) How does CPPA-G ensure that these payments are prudently aligned with the contractual terms, operational performance, and actual fuel consumption of IPPs? (iii) Are there independent checks in place, or is CPPA-G’s verification process solely reliant on the information provided by the IPPs, and (iv) is the overall process for payment approval transparent and free from potential discrepancies?
In light of these concerns, Kati has strongly requested that Power Division initiate a forensic, technical, and financial audit of CPPA-G.
“This audit should focus on examining the entire process of invoicing, payments, and verification between CPPA-G and IPPs to ensure transparency in all transactions. Such an audit will provide a clearer picture of the payment mechanisms, verify the accuracy of claims made by IPPs, and ensure that government funds are being utilized efficiently,” said Junaid Naqi, President Kati.
The Association has also recommended the involvement of an independent technical and financial firm with expertise in energy transactions and regulatory compliance to carry out this audit. Kati is ready to assist in drafting the Terms of Reference (ToRs) for the audit to ensure that all critical aspects—such as payment methodologies, fuel cost verifications, compliance with Nepra regulations, and adherence to Power Purchase Agreements (PPAs)—are adequately covered.
“A transparent audit will not only enhance the credibility of CPPA-G but also build public trust in the process, safeguarding the financial integrity of the power sector and protecting consumer interests,” he continued.
Copyright Business Recorder, 2024
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