Nepra irked by lack of studies on changing demand patterns

ISLAMABAD: National Electric Power Regulatory Authority (Nepra) expressed frustration on Tuesday with the Power Division and its associated entities for failing to conduct any studies to update the system in response to changing demand patterns.

“The financial impact of partial load has significantly increased by Rs 9 billion due to the change in demand, with an average increase of Rs 300 million per month. We were expecting the Power Division to offer ‘guidance’ when the demand pattern shifted. If needed, a study should have been conducted to align the Time of Use (ToU) tariff with demand, as peak timings have changed,” said Nepra Chairman Chaudhary Waseem Mukhtar during a public hearing regarding CPPA-G’s Fuel Cost Adjustment (FCA) request for November 2024. This request includes a negative adjustment of Paisa 63 per unit, which would refund Rs 4.891 billion to consumers.

Chairman Mukhtar pointed out the absence of Ministry representatives at the hearing and stated that he would include a note about this in the final determination. He also instructed CPPA-G to conduct a study to align the ToU tariff with the demand pattern.

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He further criticised government entities for their inaction, which results in criticism being directed at the power regulator.

CPPA-G’s CEO, Rihan Akhtar, agreed with the Chairman, acknowledging that the load pattern has changed on an hourly basis. “CPPA-G is working on this and will bring it forward either in the next tariff re-basing petition or sooner. While we originally planned to address this issue in the next re-basing, we will bring it earlier, or at least during the re-basing, arguing that the existing ToU tariff no longer aligns with current realities. The original cost model used for the ToU does not hold, and tariff modelling needs to be revised,” he said.

Chairman Mukhtar also referred to a letter from the Power Division, which stated that the government plans to submit a re-basing tariff petition in January or February 2025, urging CPPA-G to update tariff modelling in line with the revised demand pattern.

In response to a question from Member KPK Maqsood Anwar Khan regarding the impact of the winter incentives package, a CPPA-G official reported an additional consumption of 45 million units as of December 26, 2024.

Member Finance and Tariff, Mathar Niaz Rana, raised concerns about the zero plant factors of coal-fired power plants, describing the situation as alarming. He noted that two key power plants had not been dispatched any orders despite having an inventory of 90 days. This operational inefficiency impacts consumers, as working capital is allocated to these plants at 80-100% plant factor rates.

He questioned whether the working capital requirements for these plants should be tied to actual plant performance, criticising the system where plants are paid higher tariffs without generating power.

The CEO of CPPA-G endorsed Mathar Rana’s concerns but clarified that the inventory requirement is 60 days, not 90. He attributed the issue to ongoing circular debt, which he said justifies the IPPs’ positions. He also mentioned that efforts are under way (without delving into Energy Task negotiations) to link working capital costs with actual inventory needs, and applications for adjustments will be filed with Nepra. He added that while no changes are expected in the mechanism for imported coal projects, discussions are ongoing regarding working capital for other projects.

On the issue of Power Load Adjustment Charges (PLAC), which pass the impact of load factors onto consumers, CPPA-G’s CEO suggested that licensees such as Gencos, Discos, and IPPs should align their meters with actual conditions.

A representative from NPCC highlighted that the load pattern has significantly changed over the last year, recommending an investigation into the factors behind this shift.

Chairman Mukhtar responded that Nepra is not responsible for planning but faces criticism from all sides. He clarified that policy development is the Ministry’s responsibility, and it is their job to conduct such studies.

In response to a question about the Power Division’s review motion against KE’s generation tariff, Chairman Mukhtar said the matter is currently undergoing the regulatory process.

He also emphasised that reforms are necessary to align with the evolving power sector landscape. “We are in the process of reforms within the Regulator, with the involvement of donor agencies. We recognize that the regulator itself must evolve over time,” he said.

He concluded by affirming that Nepra’s role is to make decisions that may benefit some parties while disadvantaging others. He encouraged the Authority not to be afraid of criticism. “Not making a decision is far worse,” he stated.

It was also disclosed that the current circular debt stands at Rs 2.38 trillion, with payables to Independent Power Producers (IPPs) totalling Rs 1.6 trillion.

Copyright Business Recorder, 2024