ISLAMABAD: Kot Addu Power Company Limited (KAPCO) is reportedly reluctant to opt for operation under Competitive Trading Bilateral Contracts Market (CTBCM) saying that it is neither possible nor commercially viable for the company to consider or pursue such options for participation in the CTBCM any time soon, well-informed sources told Business Recorder.
M/s KAPCO, sources said, in a letter to Chief Executive Officer (CEO) CPPA-G, referred to the latter’s letter of April 04, 2024, and the letter issued by the Company (KAPCO) to CPPA-G of February 21, 2024 each on this matter titled “execution of Power Purchase Agreement (PPA)/Energy Purchase Agreement (EPA), in relation to the extended operations of the Seller’s Generation Facility (as defined in the Company’s previous letter).”
According to KAPCO CEO Aftab Butt, the company has reviewed the contents of the CPPA-G letter and note CPPA-G’s statements that: (a) following enactment of the National Electric Power Regulatory Authority (Electric Power Procurement) Regulations, 2022 (the “EPPR Regulations”), the role of power procurement resides with the Suppliers of Last Resort (SoLRs) (ie, the DISCOS and KE to the extent of its demand participation); and (b) that CPPA-G does not have any role in the procurement of power in future.
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The CEO KAPCO maintains that as mentioned by the Company in its previous letter, pursuant to the Order of the National Electric Power Regulatory Authority of February 12, 2024, NEPRA has extended CPPA-G’s original registration to the extent of its agency functions as a “market operator” under rule 3 (Registration of market operator) of the NEPRA (Market Operator Registration, Standards and Procedure) Rules, 2015, until the registration of CPPA-G as the Special Purpose Agent (SPA) by NEPRA under section 25A (Registration) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 (extension to original registration).
The CEO KAPCO has cited reference of the Order which specifically addressed CPPA-G in NEPRA’s letter of February 12, 2024, titled “Order of the Authority for allowing provisional extension of certificate of registration to CPPA-G as Power Purchaser/Special Purpose Agent of DISCO(s)”.
Under the Order, it has particularly stated that: (i) NEPRA had granted a Certificate of Registration on November 16, 2018) to CPPA-G, under the Market Operator Rules, to act as a market operator and power purchaser/SPA of the ex-WAPDA Discos (original registration). While granting the original registration, NEPRA had fixed its term until November 15, 2023; (ii) under the original registration, CPPA-G was initially performing both the market operator functions and agency functions.
However, the market operator functions of CPPA-G are now covered under the Market Operator Licence of May 31, 2023, granted by NEPRA under the NEPRA Act; (iii) CPPA-G had submitted its application to NEPRA (through letter of November 2022) for grant of registration as the SPA, along with the draft SPA code, under section 25A of the NEPRA.
Subsequently NEPRA had published/issued public notices for seeking comments from various stakeholders in the matter from various stakeholders in the matter of application (including the draft SPA code). Upon receiving comments/observations from various stakeholders on the draft SPA code, NEPRA had observed that “substantial changes/improvement” are required in the draft SPA code and therefore considered that “the finalization of the same by CPPA-G and its subsequent approval by the Authority will take some time.”
Hence, given that the finalization of the draft SPA code is still pending, NEPRA decided to grant the extension to the original registration to allow CPPA-G to continue its agency functions until it is registered as the SPA by NEPRA. Further, the Order explicitly states that CPPA-G is required to comply with the terms of the Order and all relevant determinations and directions issued by NEPRA from time to time. CEO has specifically referred to the last sentence of the Order in this regard.
“Since, NEPRA has not yet registered CPPA-G as the SPA, we note that the extension to original registration under the Order is therefore valid. Thus, at present, CPPA-G is legally authorized by NEPRA to enter into a PPA/EPA for and on behalf of the DISCOs, with KAPCO for the sale and purchase of the electricity generated by the generation facility,” said Aftab Butt in his letter.
M/s KAPCO also noted that the EPPR Regulations are still very nascent. The practical procedures for new procurement by SoLRs under the EPPR Regulations are currently not in place and accordingly, certain constraints (legal, technical, financial and commercial) with respect to the ability of the DISCOs to execute PPAs/EPAS as SOLR(s) still need to be addressed.
Moreover, the power company says that the options proposed in CPPA-G’s letter for it to participate in the CTBCM may be helpful only when the CTBCM is fully functional and bankable.
“As acknowledged by CPPA-G in its letter, indeed the CTBCM has not yet operationalised and therefore, it is not possible nor commercially viable for KAPCO to consider or pursue such options for participation in the CTBCM any time soon,” he continued.
Copyright Business Recorder, 2024
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