IPPs not liable to audit performance?

Independent Power Producers (IPPs) on Thursday claimed that they are not liable to performance audit under the agreements signed with the Government of Pakistan (GoP) as the tariff was granted for 25 years. The IPPs took this stance at a time when the Ministry of Water and Power is urging the sole power sector regulator, National Electric Power Regulatory Authority (Nepra), to conduct a performance audit of IPPs to determine their efficiency level.
In a frank discussion with media, Chairman Independent Power Producers Advisory Council (IPPAC) Qasim Niaz stated that IPPs provide every kind of performance related data to Nepra each month, adding that there is no need of two regulators as the expertise of SECP is different. During a question answer session, one of the representatives of IPPs said that during operation, a fault can appear in the machine and performance can go down but the government will not compensate in that case and if efficiency increases this allows some financial benefit to the plant.
"The issue of performance audit cannot arise as pre-set tariff was granted when the plant was established in 1995 in accordance with the technology. There is no provision in the event that we do some magic every day to show performance. We cannot change technology," he added.
Commenting on the controversy regarding payment of Rs 480 billion in June 2013 to clear the stock of circular debt due to which six or seven plants stopped operations, Qasim Niaz, a former bureaucrat, said that the power purchaser ie National Transmission and Despatch Company (NTDC) which is now called Central Power Purchasing Agency - Guaranteed (CPP-G) conducted a pre-payment audit in accordance with the agreements between the GoP and IPPs.
In June 2013 the incoming Government authorised payment of Rs 480 billion to clear the long outstanding Circular Debt consisting of payments owed to various energy sector entities including IPPs , Government owned thermal Power Plants (GENCOs) and Oil Companies for fuel supplied to power plants.
He said there is no need to conduct audit of payments by the Accountant General of Pakistan Revenue (AGPR) as any such mechanism could delay payments to the IPPs which require payment of claims to clear the dues of fuel suppliers as per the contracts. "Opting for a pre-audit by AGPR rather than the present specialised audit procedure would most likely delay payments thereby resulting in late payment charges by government as well as interruption in power generation by IPPs due to shortage of their working capital," said Chairman IPPAC.
However since a controversy developed surrounding these payments, the Auditor General of Pakistan conducted a special audit and presented a report to the Public Accounts Committee of the National Assembly. "Auditor General's Office in its report mostly points to some irregularities in the procedure followed by the Government while making these payments, there is no accusation of the payments being mala fide, undue, fraudulent or in excess of the contractual agreements with IPPs," he added.
The basic objection highlighted by the report is that the payment of Rs 342 billion for settlement of circular debt without a pre-audit by AGPR was irregular. He said that out of the Rs 480 billion only Rs 270 billion was paid against outstanding invoices of 25 IPPs.
The remaining amount was paid in cash/book adjustments to various power sector entities including Government owned thermal power plants [GENCOs] for supply of electricity and Oil companies such as PSO for supply of fuel to power plants etc. He further revealed that if during this process any amounts claimed by IPPs were disputed by NTDC, they were withheld and not included in the aforementioned Rs 270 billion cleared for payment, adding that routine invoices cleared by the NTDC require a pre-audit which is then subjected to an external post audit after every six months which takes place routinely.
IPPs have installed generation capacity of 9192 MW (37%) out of 24823 MW, the total installed generation capacity in Pakistan as on 30 June, 2015. However the share of the entire private sector is 11509 MW (46.36 %).
47201 GWh of the total 109059 GWh ie 43.3 % of electricity generation put on the national grid in 2014-15, was produced by IPPs. Of total thermal power of 69988 GWh, IPPs produced 46163 GWh ie 66 %. IPPs are responsible for around 66 % of the total thermal power produced in the country and about 43.3 % of the entire electricity generation in the country. The share of IPPs in total power generated has risen steadily from 39.7 % in 2009-10 to 43.3 % in 2014-15. As opposed to this, the share of Public Sector GENCOs has fallen from 19.5 % to 12.19 %.
In reply to a question, one of the IPPs' representatives claimed that merit despatch order is formulated in the National Power Control Centre (NPCC) which has direct interaction with the control room of an IPP. However, another representative contradicted this claim saying that merit order is formulated in the cost accounting office situated in the Wapda House, Lahore. The experts work out cost of each and every plant after calculating the price of input for next two weeks and then send it to the NPCC. IPPs overdue amount against CCPA-G has touched Rs 140 billion mark.