Negotiations with IPPs: Nepra voices concerns about ‘key’ factors

ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) raised concerns on Thursday about factors in negotiations with Independent Power Producers (IPPs) that could negatively affect investment in the country.

These concerns, based on media reports, were voiced by Nepra members during a public hearing on the provisional Fuel Charges Adjustment (FCA) for K-Electric for September 2024. K-Electric has sought a negative adjustment of 16 paisa per unit to refund Rs 247 million to consumers, plus General Sales Tax.

During the hearing, several interveners praised NEPRA Member (Tariff and Finance) Mathar Niaz Rana for his dissenting note on K-Electric’s generation tariff. They also discussed the recent termination of contracts for five IPPs and ongoing negotiations with other power plants.

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These negotiations are led by the Energy Task Force, headed by Minister for Power Sardar Awais Khan Leghari, and include Special Assistant to the Prime Minister on Energy Muhammad Ali, Lt. Gen. Muhammad Zafar Iqbal, Nepra Chairman, the CEO of CPPA-G, and other experts from NEPRA, CPPA-G, SECP, and PPIB.

When the issue of the recent termination of IPP contracts was raised, Nepra Members Amina Ahmed (Law) and Rafique Ahmad Shaikh (Technical) expressed their views openly.

“There is no policy on the government side. What is happening regarding IPP contracts, as reported in the media, is not an actual policy. It’s unfortunate that such things are happening,” said Member Law Amina Ahmed.

Member Technical Rafique Ahmad Shaikh, visibly annoyed by personal remarks from Jamaat-e-Islami representative Imran Shahid, supported Ahmed’s comments about the treatment of IPP investors.

He questioned whether the intention was to drive investors out of the power sector. Imran Shahid accused NEPRA members of colluding with K-Electric to extend financial benefits at consumers’ expense, claiming K-Electric merely rubber-stamps requests. Shaikh and Ahmed expressed their frustration over the language used by the JI representative during the hearing.

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Shaikh announced plans to propose that only representatives from the business community and relevant chambers be allowed to speak, indicating his discontent with political representation. “We are not here to be degraded. Our patience has limits. If anyone doubts our decisions, there’s a process to file a review,” he stated.

He directed NEPRA’s team to document questions raised by Arif Bilwani for detailed responses from K-Electric’s management.

Bilwani contended that the 16 paisa relief in FCA was due to electricity supplied from the national grid, as K-Electric’s own generation was expensive in September 2024. He also questioned the pressures of LNG on two plants, one of which is using a compressor. K-Electric management addressed these inquiries and explained the compressor’s installation.

Tanveer Barry, a representative of the Karachi Chamber of Commerce and Industry, criticized the FCA for discriminating against Karachi consumers. He noted that while the FCA adjustment for Discos was 71 paisa per unit for September 2024, K-Electric consumers would only receive relief of 16 paisa per unit.

Barry urged K-Electric to incorporate renewable energy into its generation mix to lower tariffs and foster industrial growth.

Ayaz Jaffer, Director Finance at K-Electric, remarked that K-Electric’s FCA rates have been lower than those of Discos for the past two to three years, attributing the higher fuel costs to the non-availability of local gas for power plants. He suggested that if local gas were made available, K-Electric’s fuel cost could drop to Rs 8-10 per unit.

He added that K-Electric’s overall output was 6 percent lower in September 2024 compared to the same month in 2023, with a significant 12-13 percent decline in the industrial sector and a 3 percent decline in the domestic segment, primarily due to the country’s economic conditions. However, a winter package is expected to boost economic activity and power demand.

Copyright Business Recorder, 2024