A high-level nine member inter-departmental probe committee, including a representative from Inter Services Intelligence (ISI), in its preliminary report has recommended the government review Power Purchase Agreements (PPAs) with the Independent Power Producers (IPPs) as some of the clauses extend undue benefits to the power projects, well informed sources told Business Recorder.
Headed by former Chairman SECP, Muhammad Ali, the committee comprises Additional Secretary, Power Division- Member, a nominee of National Electric Power Regulatory Authority (Nepra)-Member, a nominee of Central Power Purchasing Agency-Guaranteed (CPPA-G)-Member, a nominee of National Power Control Centre(NPCC)-Member, a nominee of Federal Investigation Agency (FIA)-Member, a nominee of Securities and Exchanges Commission of Pakistan (SECP)-Member, a nominee of ISI-Member, and officer not below the rank of Deputy Secretary, Power Division as Secretary to the Committee.
The mandate of the committee was to identify and examine causes of the high cost of electricity with a special reference to private power generation i.e. IPPs.
The committee which is yet to submit a final report to the government maintained the view that the power projects are enjoying some financial benefits which will end with the expiry of PPAs but for the time being such benefits are being extended which need a review, the sources added.
The committee which failed to get special treatment from the Power Division and Finance Division despite having good ties at the highest level, was allowed to co-opt any expert from government as well as private sector and engage to seek information and assistance from technical testing firms, Advisors, bankers, CA audit firm (A-rated category), legal advisors, insurance Advisors, Asset Management Company etc, or any other organisation or individual as deemed necessary; and seek record and information from relevant stakeholders as deemed appropriate for the purpose.
The Terms and Reference (ToRs) of the committee were to review matters pertaining to the cost of setting up private power generation units in the country under various power policies, without limitation, whether under IPPs mode for under government ownership, approvals, financing arrangements, set-up cost, cost of over-runs if any, operating cost and cost models, revenues and return models, billing, cost to the government, role of government, its departments and various regulatory bodies etc, and identify any unethical or illegal practices, administrative procedural weakness and regulatory gaps that may have taken place and recommend the way forward to rectify these and review: (a) matters pertaining to the ' circular debt' of the country, without limitation, the cause of build-up of circular debt, examine payments made from time to time to clear outstanding dues to the IPPs, examine causes for under collection of revenue by Discos, electricity tariff determination, policies and procedures, systematic issues, which may have exacerbated the situation, etc, and identify any unethical or illegal practices, administrative and procedural weaknesses and regulatory gaps that may have taken place and recommend the way forward to remedy these; and (b) policies and models of power sector globally and recommend the way forward for changes in the country's power policy and structure of the sector including without limitation, generation, transmission, distribution, organizational set-ups, regulatory reform, governance reform, financial clearing, market-based mechanisms etc, with a view to ensure avoidance of circular debt in the future and reduction of cost of power to consumers.
The committee has also reviewed compliance of IPPs with the parameters and terms and conditions of various agreements signed with relevant government agencies/ bodies which include the following areas: (i) any relaxation given to the IPPs in violation of policies/rules, including but not limited to tariff determination, financial closure, construction period, capacity payments and merit order etc; (ii) efficiency (machine as well as plant/ fuel) allowed in tariff and actual efficiency, frequency of efficiency verification, fuel costs and inventory etc; (iii) cost accounting mechanism and review of various cost components; and (iv) review of technology, capital costs and financial structure submitted for tariff determination.
Meanwhile, Government of Pakistan (GoP) and IPPs have also reached an agreement to resolve prolonged outstanding issues and litigation at different domestic and international fora.
The sources said settlement agreements would be signed with the Altas Power, Attock Gen Ltd, Halmore Power, Naowal Energy, Liberty Power Tech, Nishat Chunian, Orient Power, Saif Power and Saphire Electric. However, there is delay in signing of agreement due to settlement of issues with M/s Rouch Power Company of Prime Minister's Advisor on Commerce, Industries and Production, Abdul Razak Dawood.
The ECC had approved an out of court settlement with M/s Rousch but after severe criticism from media the cabinet backed out from its decision and constituted a committee under the chairmanship of Minister for Economic Affairs, Hammad Azhar to review the issue. The committee has not yet submitted its report due to which the agreement with IPPs is in the doldrums.
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