ISLAMABAD: National Transmission and Despatch Company (NTDC) has knocked the doors of National Electric Power Regulatory Authority (Nepra) for recovery of long withheld amount of Rs 41.5 billion from Discos consumers.
This issue of withheld amount has repeatedly been raised by the Finance Department of NTDC during public hearings with the plea that the organisation is not even able to clear its bills due to prolonged delay in clearance of huge amounts. However, it could not sort out the issue due to technical issues which NTDC is still facing.
NTDC, in its petition, already landed in Nepra, shared the history of efforts made to clear this amount including a petition filed in Islamabad High Court.
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NTDC also highlighted that the practice of Economic Merit Order (EMO) deduction in FCA decisions, has effectively deferred the recovery of Rs. 41.436 billion actually incurred fuel cost from the end-consumer of Discos spanning over a period of 36 months, September 2019 to October 2023 on the basis of “provisionally with-held” and “under-study” EMO deductions.
NTDC enclosed past correspondence in this matter and requested that in order to protect the Discos consumers from excessive burden of accumulated additional financing costs due to the delayed release of provisionally withheld EMO deductions the practice of EMO deductions may be “de-linked” and discontinued from monthly Discos FCA hearing proceedings.
NTDC, in its petition has requested the power sector regulator to allow it a hearing before the Authority to further elaborate the submissions for Authority assistance and/ or include any other ground at the time of hearing, if needed.
The petition further notes that NTDC is an infrastructure-based transmission utility which is a strategic asset of the country. NTDC’s fiscal position does not allow disproportionately huge EMO deductions from its revenue which potentially risk impacting the NTDC financial indicators adversely.
Furthermore, unabated continuation of such practice will contribute towards breach of the NTDC loan covenants, jeopardising the upcoming national transmission system projects of critical importance.
In view of submissions, NTDC has requested the Authority to: (i) protect the rights of NTDC as a licensee, and ensure that Nepra approved revenue requirement is not subjected to deductions, which may jeopardise the legitimate and prudent financial interests of NTDC; (ii) de-link and discontinue the practice of EMO deviation deductions from Discos FCA proceedings; (iii) allow CPPA-G to recover the “provisionally with-held fuel charges amounting to Rs. 41.436 billion from end-consumers of Discos and; (iv) resultantly, CPPA-G may be directed to credit the already deducted amount of “NTDC Use of System Charges” (on account of EMO deviations) rightfully in NTDC’s favour.
NTDC further stated that it is actively pursuing a transmission system constraint removal plan. Transmission system constraints/ congestions are a globally inevitable operational eventuality, which cannot be fully eliminated.
The international best practices are that there are certain mechanisms to deal with the consequential financial impact of such transmission system constraints, wherein it is reflected in the pricing of corresponding user of the transmission system.
However, in the instant case, Nepra holds NTDC entirely responsible for all such constraints and the corresponding financial impact has been charged to NTDC, instead of passing it on to the transmission users, i.e., Discos.
NTDC has submitted transmission investment plan of Rs. 510 billion for FY 2023-2025 in line with the objectives and mandate of its transmission licence. Being an infrastructure-based company, an overwhelming majority of NTDC projects are financed from Commercial Loans. EMO deductions adversely affect the NTDC financial ratios and will directly contribute towards a breach of the loan covenants.
Furthermore, huge EMO deductions ignore the repercussions on NTDC financial health, and inhibit the ability to timely executing the upcoming national transmission system constraint projects by depriving NTDC of its necessary funds.
It said; therefore, these EMO deductions are a “counter-productive” enforcement measure, which is detrimental for the smooth functioning of power system in general and NTDC in specific.
Copyright Business Recorder, 2024
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