ISLAMABAD: The Auditor General of Pakistan (AGP) is to conduct financial audit of Neelum Jhelum Surcharge (NJS) collected by Discos and remitted to Water and Power Development Authority (Wapda) after December 28, 2018, well-informed sources told Business Recorder.
On December 12, 2007, the federal government had approved Paisa 10 per unit surcharge on electricity requisition on all concerns except K-Electric and lifeline consumers for eight years from January 01, 2008 to December 31, 2015. However, pursuant to the extensions granted by the ECC on May 3, 2018, the NJS was allowed to be imposed until achievement of Commercial Operation Date (COD) of the whole project.
Wapda, in its letter to Power Division had communicated that the effective date for tariff as per Nepra notification (taken as equivalent of COD) was July 4, 2018. However, Ministry of Water Resources has not officially communicated the COD of the whole project to Power Division, nor has it requested ECC to rescind the NJS after completion of the project. From January 2008 to December 2018, Discos had collected Rs 67.167 billion and transferred Rs 62.670 billion to Wapda on account of NJS. Power Division in its proposal submitted the following proposals to the ECC: (i) NJS already imposed on electricity consumers @ Re 0.10/kwh for development of NJP, may be revoked with immediate effect; (ii) NJS collected by the Discos and transferred to Wapda after, December 28, 2018, i.e., the date of taking over all units of NJP, be audited by Auditor General of Pakistan; and (iii) NJS collected after taking over of the NJP by Wapda may be returned to the eligible consumers/adjusted in their forthcoming electricity bills.
The sources said Power Division has written a letter to AGP for financial audit (collection and remittance) of NJ surcharge from December 28, 2018. Wapda has opposed swapping of NJS of paisa 10 per unit for development of Diamer-Bhasha Dam (DBD). Wapda argued that Neelum Jhelum Hydropower Project is a stand-alone project, which was developed by establishing a Special Purpose Vehicle (SPV) Company, with a separate legal and corporate status, BoD, generation licence, tariff, Power Purchase Agreement (PPA) and financial control, etc. In contrast, Diamer-Bhasha Dam (DBD) is being developed under the generation licence of Wapda hydroelectric. The tariff methodology of NJHPC is regulated on the analogy of Independent Power Producers (IPPs) which is entirely different from the methodology adopted by Nepra for hydropower stations included in the generation licence of Wapda hydroelectric. According to sources, the capital structure of DBD is different from that of Neelum Jhelum Hydropower Project. The base cost of DBD is Rs 1.283 trillion. To finance this, the Federal Government would provide Rs 398 billion as a PSDP grant which would have no bearing on the tariff of Wapda hydroelectric. Wapda would inject Rs 199 billion as equity into the project and Rs 686 billion would be raised through commercial financing. Any change in the capital structure would require revision of PC-1 and delinking of DBD from Wapda hydroelectric generation licence. It would also mean that all project loans will have to be transferred to DBD Company. Without the backing of Wapda's balance sheet, it would be very challenging to obtain commercial financing for the DBD Company, thereby jeopardizing the financial close of the project.
Wapda further contended that in case of swapping the NJS @ paisa 10 per unit, there would be the following two potential outcomes which will result in financial loss for Wapda and therefore Wapda does not support the swapping of NJS to DBD: (i) the federal government is likely to deduct an equivalent amount collected through DBD surcharge from the approved PSDP grant; and (ii) since DBD surcharge will be recovered from electricity consumers, Nepra will also disallow an equivalent amount in the tariff allowed to Wapda hydroelectric.
Copyright Business Recorder, 2021
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