National Electric Power Regulatory Authority (Nepra) has raised transmission tariff by 3 paisa for the 878 kilometres transmission line to be constructed from Matiari to Lahore after informal meetings and public hearing. Private Power Infrastructure Board (PPIB), a subsidiary of Water and Power Ministry, had sought upward revision in the cost of the project and transmission tariff.
Ministry of Water and Power has awarded the contract to a Chinese company to transmit 4,000 MW electricity from Port Qasim and Thar to Lahore and Faisalabad. Nepra had determined the cost of transmission line at $2.70 billion as well as transmission tariff at Rs 0.71 per unit. PPIB had sought revised tariff of Rs 0.92 per unit but Nepra has allowed Rs 0.74 per unit - a mere three paisa per unit more than the earlier determined tariff.
Nepra, in its revised determination, noted that the mobilisation cost claimed by the petitioner is 8.11 percent of the total equipment and machinery cost of transmission line. The Authority has been informed that this cost ranges between 5-7% depending on nature and size of similar projects.
The Authority further considered that for an ambitious 27 month construction period the cost may be higher to some extent. As this project is the first of its kind in Pakistan and since there is no authentic and reliable information available specific to Pakistan in this respect therefore the Authority is constrained to assess this cost on the basis of 7%, which is an upper limit of total equipment and machinery cost of transmission line subject to provision of verifiable documentary evidence to the satisfaction of the Authority at the time of COD.
The Authority while considering the petitioner's request for increasing the security cost maintained that the already allowed security arrangement cost of $9.859 million for transmission line is sufficient. Moreover, the Co-operation Agreement signed for this project between NTDCL and SGCC states that "GoP shall provide and be responsible for sufficient security by security agency of Government, for example ranger, police etc for work site, Chinese staff, equipment & material and operating assets, from feasibility study till the BOOT period completion. Such cost shall be borne by GoP or allowed as pas through cost in the tariff."
Accordingly if the project still additionally requires deployment of more security forces including rangers then the security cost, incurred thereon in addition to the already allowed cost, will be allowed as per actual, subject to submission of verifiable documentary evidence to the satisfaction of the Authority at the time of COD justifying the additional security requirements as required and proposed by relevant Authorities. The cost allowed for tower material, conductor, foundation, tower erection, stringing, insulator and the cost due to change in length of transmission line will be adjusted at the time of COD as per the mechanism provided in this decision.
During the review motion proceedings, NTDCL revealed that it was going to appoint Independent Engineer/Owner's Engineer for review of design and to work out the exact quantities of different components of the transmission line as noted. The Authority considered that the role of the independent engineer/owner's engineer is critical to the optimum techno-economic design and to achieve cost effective solution. Therefore, the data to be submitted at the time of COD for transmission line cost adjustment must be duly verified by Independent Engineer/Owner's Engineer and duly endorsed by NTDCL. The actual cost of these towers and related components will be adjusted as per the design finalised and complied during the implementation phase and technical specification finalized by NTDCL.
The Petitioner in its review motion submitted that in the tariff determination dated August 18, 2016, the Authority did not allow withholding taxes and sales tax while determining EPC cost, O&M costs, land lease cost and interest cost. The Petitioner stated that if any WHT or Sales Tax is payable by the Petitioner, it will be Petitioner's final tax liability and will impact equity Internal Rate of Return, however, this has not been allowed as pass-through unlike precedents approved by Nepra.
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