PD blamed for IPP agreements: Sovereign contracts cannot be opened unilaterally: Nepra

ISLAMABAD: Acknowledging difference of opinion within the authority on IPPs contracts, Nepra on Wednesday blamed the Power Division for the agreements while asserting that sovereign contracts cannot be opened unilaterally though a request can be made to the sponsors.

The issue of IPPs’ agreements, which are under scrutiny at all forum including the business community, was raised during a public hearing on CPPA-Gs FCA adjustment request for June 2024. The CPPA-G has sought positive adjustment of Rs 2.63 per unit for June 2024.

According to CEO, CPPA-G, consumers will pay FCA of Rs 3.33 per unit in July’s bills but they will pay Rs 2.63 per unit in August 2024, which means a reduction of Rs 0.70 per unit in their bills to recover an additional amount of Rs 34.38 billion. Chairman NEPRA, however, hinted that effective reduction may be of Rs 0.75 per unit.

Tanveer urges govt to annul agreements with IPPs forthwith

During the hearing, questions were raised about substantial reduction in demand, new generation plants, shifting of industry from grid to solar, consumer tariff structure, peak hours and IPPs contracts.

Responding to a question regarding opening of IPPs contracts, Chairman NEPRA, Waseem Mukhtar said that Power Division deals with IPPs agreements, which the Regulator can assist with but only if the Division decides to proceed ahead with it; the Regulator cannot do anything on its own in this regard.

He asked if Member Amina Ahmad, Member Law, wishes to add to his statement to which she responded that there is a difference of opinion within the Authority on its legal role in the review of IPPs contracts. And contended that sovereign contracts have been signed with the IPPs, which cannot be opened unilaterally, but IPPs sponsors can be requested.

It was further stated that investors will be reluctant to invest in Pakistan if they reckon the country may question the agreements at a later date.

“IPPs contracts, right or wrong, were inked by the government. Now, we cannot open those contracts unilaterally. Government can merely request them to cooperate,” she added.

The Authority was also informed that electricity demand decreased by 11 per cent in June 2024 against June 2023, whereas a 2 per cent decrease in demand has been recorded on year to year basis. One reason for the massive decline was an increase in domestic and industrial solarization. CPPA-G CEO Rehan Akhtar said the new technology, ie, batteries which are used to store electricity from solar system will further hit consumption.

Mathar Niaz Rana, Member NEPRA (Finance, Tariff) argued that when new storage technology is being introduced in the market, the government should not sign long-term (25-30 years) contracts with producers.

Rihan Akhtar clarified that no new contract is allowed under the new IGCEP, adding that only existing commitments are being honoured. It was also proposed that there is a need to review the country’s tariff structure so that tariffs may be lowered for those who consume more electricity as current tariff structure discourages more consumption.

It was noted that Power Division is working on a proposal to shut down all imported fuel based expensive power plants.

Rafique Ahmad Shaikh, (Member Technical) maintained that CPPA-G should be attentive to more reduction in demand as Punjab and Sindh have already started distribution of solar PV panels to poor consumers whereas KPK is also preparing for such a scheme.

Taking part in discussion on installation of solar system, Chairman NEPRA said he has noted that now industrialists have installed solar systems on the premises of their industries and using grid electricity as backup adding that this aspect needs consideration while making policy.

Copyright Business Recorder, 2024