Govt to review existing power purchase agreements

ISLAMABAD: Prime Minister Shehbaz Sharif has constituted an Inter-Ministerial Committee (IMC) headed by the Minister for Power, Sardar Awais Leghari, to review the existing Power Purchase Agreement (PPA) template to protect consumers against losses caused by inadequacies on the part of power producers, sources close to the power minister told Business Recorder.

The decision to formulate the committee was taken at a meeting held on 969MW Neelum-Jhelum Hydropower project, which has been dysfunctional since long due to serious design faults, inflicting billions of rupees loss to the national economy.

The purpose of the committee comprising the Power Minister (Convener), Water Resources Minister (Member), Deputy Chairman Planning Commission (Member), Secretary Power Division (Member), Chairman NEPRA (Member), Secretary Water Resources (Member) and Chairman WAPDA (Member) is to deliberate and present a report on consumer tariff issues emanating from the collapse of the tunnel of NJHPP.

To be conducted by PPIB, CPPA-G and Nepra: Govt orders ‘audit’ of agreements with IPPs

A two-member committee submitted its initial report on the faults of the NJHPP.

Prime Minister Shehbaz Sharif, who undertook a crucial visit to China during the first week of June, raised the issue of NJHPP with the top boss of the Chinese companies China Energy/China Gezhouba Group which built the project.

“Prime Minister raised the issue of serious design flaws in Neelum Jhelum HPP and asked them to rectify the fault to make the project operational as soon as possible,” the sources said, adding that Chairman Gezhouba Group committee to investigate the matter and submit a report.

The constitution of the IMC comes at a time when a wide discussion has started on the IPPs heat rate, especially their capacity payments which are about Rs2.8 trillion for 2024-25, mainly due to a massive devaluation of the Pak rupee versus the dollar, KIBOR and LIBOR.

The Terms of Reference (ToRs) of the Committee will be as follows;(i) examine the tariff impact of reported frequent outages at NJHPP due to structural damages since COD;(ii) mechanism to ring fence consumers against additional charges due to plant outages caused by design/construction flaws; and (iii) review existing PPA template to protect consumers from bearing losses caused by inadequacies on the part of the power producers.

The committee may co-opt additional members on a need basis, and submit its report within one week.

The Independent Power Producers (IPPs) Advisory Council (IPPAC) has preferred to keep a mum on this issue, however, some of the IPPs’ representatives are sharing their views on social media groups.

Political parties such as Jamaat-e-Islami and MQM (P) have also supported a probe against IPPs besides a review of their IPPs.

Former Minister for Commerce Gohar Ejaz and the incumbent commerce minister also arguing each other on X - a social media platform.

Recently, testifying before the National Assembly Standing Committee on Power, Secretary Power Rashid Langrial assured that the Power Division was ready to scrap the IPPs pacts if this recommendation came from the National Assembly forum.

Minister for Power Leghari proposed to the Chairman of the National Standing Committee, Muhammad Idrees, to take up the profile of each IPP individually to know when their contracts will expire.

How much payment has already been made to them? Whether the existence of the IPPs is beneficial for the country or it is better to clear all due costs and retire them and what cost the country has to pay if the government decides to get rid of the IPPs.

The Minister for Power has also ordered the audit of dozens of IPPs agreements established during the last 30 years, jointly to be conducted by the PPIB, the CPPA-G and the Nepra, after a Senate panel chief termed the contracts of IPPs as “dacoity” and sought project-wise detail including heat rates and regional comparison of the price of the same technology.

“I would appreciate that If the information and analysis of this matter were dealt with investigated mind and bring out whatever you find from the documents. There are two ways to assist the Parliament in this regard.

The PPIB and the CPPA-G people know the agreements inside out and if there is anything which has had any financial implications. Investigate when changes were made to the agreements and what was the financial implication of that change,“ the minister said in his directions to top bosses of the PPIB and the CPPA-G.

Meanwhile, a fierce exchange of views is under way between Gohar Ejaz, former caretaker minister and incumbent power minister.

Former caretaker minister said, “average 13,000 MW electricity was being consumed in 2015 and capacity charge was Rs200 billion, with 20,000 MW installed capacity.

Now capacity payment amount is Rs2 trillion and the 2024 consumption is still 13,000 MW, with installed capacity of 43,400 MW.

He was of the view that the same consumer for the same units is being made to pay 10 times, capacity charges.

All these IPP plants are being paid Rs2 trillion with partial or zero production of electricity. How will the country survive with such IPP agreements.

In reply to Gohar Ejaz, the incumbent power minister said, “Dear former Minister.(ill informed), FYI! 35 years of desperate and ill planning is being sorted out. For the first time, the privatisation effort has been launched aggressively for Discos. Something that was never done earlier.”

Copyright Business Recorder, 2024