ISLAMABAD: The Power Division is reportedly unwilling to commit more than 1,000 MW of electricity to K-Electric (KE) from the National Grid in the new Power Purchase Agreement (PPA), saying any additional supply over and above committed quantity would be based on pro-rata basis and quota of power Distribution Companies (Discos), well-informed sources told Business Recorder.
A high-level task force headed by former prime minister Shahid Khaqan Abbasi held at least two back-to-back meetings to find solutions to prevailing KE issues. The meeting was also attended by KE’s Shan A Ashray.
Previously, the Power Division, led by Secretary Ali Raza Bhutta had assured KE that the GoP will supply 2,050 MW from National Grid, of which 1,300 MW would be supplied on committed basis whereas remaining will be supplied as and when available basis.
However, Bhutta’s successor, Rashid Mahmood Langrial maintained that the GoP can guarantee only 1,000 MW of which 650 MW is previously committed whereas 350 MW will be additional from the National Grid. Any additional supply over and above 1,000 MW would be based on availability of power.
“Power to be supplied on pro-rata basis as KE has permission to put its own generation with immediate effect. The new proposed agreement will be on pro-rate basis,” the sources added.
Both sides, ie, KE and the Power Division have jointly identified the following issues which require a resolution:(i) execution of Power Purchase Agency Agreement (PPAA), Interconnection Agreement (ICA) and Tariff Differential Subsidy (TDS) Agreement; (ii) finalization of Arbitration Agreement (AA) for resolution of disputes around historic receivables and payables between KE and Government Entities; (iii) approval of write-off claims pending with Nepra; (iv) timely determination of Quarterly Tariff Adjustments (QTAs); (v) execution of Gas Supply Agreement (GSA); (vi) receivables and payables with Government Entities including KWSB and CDGK.
KE tariff adjustment: Power Division to approach Nepra
During discussion, on payables and receivables, the Task Force was informed as of June 2022, KE stood to receive Rs 26 billion on net principal basis including the amount pending with Nepra in respect of Tariff Differential Claims (TDCs).
KE argued that timely release of funds is critical to KE’s financial viability as delays in payment hinder KE’s ability to procure fuel from government owned entities, adding that KE has already stretched its borrowing limits with total borrowings of over Rs 300 billion. Arrangement of additional financing lines has become very challenging as exposure with banks is already very high and lending capacity of majority of the banks has been exhausted.
KE claims that the volume of its receivables is Rs 290 billion whereas its payables are also about Rs 290 billion. However, the GoP is not ready to accept responsibility of payables of provincial entities.
According to CPPA-G, volume of receivables from KE stood at Rs 400 billion, however, KE says that since CPPA-G has also added Late Payment Surcharge (LPS) in total receivables, it should also be allowed to charge LPS on delayed payment of subsidy on the principle of “fairness and equity”.
KE, sources said, has proposed that existing amount of payables and receivables be put in “square bracket” and it would ensure payments in future.
The sources said, a Committee comprising of Prime Minister Coordinator on Economy and Energy, Bilal Azhar Kayani, representative of Finance Ministry CEO, CPPA-G and KE CEO, Moonis Alvi are to discuss receivables plus payables to be reconciled between relevant Government Ministries and KE. Amounts agreed to be settled mutually, and disputed amounts to be discussed in Task Force.
On the issue of new Gas Supply Agreement (GSA) legacy dues to be addressed together with other GoP dues. SSGC and KE to finalize quantity of gas to be provided under GSA. KE is allowed to import its own gas.
The issue of write-offs of Rs 37 billion is still unresolved as Nepra is correct in GoP’s view. If KE has disconnected a customer, it must have CNIC details. KE to explain why it can’t provide CNIC number.
On issue of Arbitration Agreement, the Task Force was informed that Attorney General Office is coordinating with KE and lawyers from both sides to finalize arbitration agreement.
Talking to Business Recorder Bilal Azhar Kayani, said that the government is engaging with KE on multiple issues so that a way out can be found to resolve matters.
Replying to a question, he said that PPA is part of discussion including purchase of electricity from national grid.
“Exact quantity of electricity to be supplied to KE from national grid is under discussion,” he added.
Kayani maintained that issuance of National Security Certificate (NSC) to KE is not part of discussion of Task Force.
“The primary focus is on resolving issues between GoP and KE and ensuring welfare of KE consumers,” he concluded.
Copyright Business Recorder, 2022
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