700MW imported coal-fired plant: KE seeks notification of tariff determination

Karachi Electric (KE) has reportedly asked the Power Division for notification of tariff determination of 700MW imported coal-fired power plant, sources told Business Recorder. KE has written a number of letters to the federal government on different occasions regarding tariff notification of 700 MW Datang Coal Power Plant, Joint Venture of KE and China Machinery and Engineering Corporation (CMEC).

A KE team led by its Chief Executive Officer (CEO) Moonis Alvi held a detailed meeting with the Power Division's team and discussed all the pending issues being faced by the power utility including notifications of coal-fired plant's determination and consumer end tariff of 11 quarters. National Electric Power Regulatory Authority (Nepra) has increased K-Electric's (KE's) tariff by 38 per cent or Rs 4.87 per unit to Rs 17.69 from Rs 12.82 per unit across the board for 11 quarters from Jul-Sep 2016 to Jan-Mar 2019 under quarterly adjustment formula.

The sources said, a team of experts is working on quarterly tariff adjustment, aimed at passing it on to the consumers in installments instead of one go. KE argues that despite a lapse of three years, Nepra's determinations of August 11, 2016 and November 7, 2018 in the matter of 700 MW coal project, are pending notification by the Ministry of Energy (Power Division) which has already impacted on the project timelines.

KE further maintains that further delays in tariff notifications of the 700MW coal projects would impact the project's Commercial Operations Date (COD) and consequently the power demand gap within KE's service area, resulting in increased and prolonged load-shedding hours, having significant adverse implications for KE's consumers and the economy at large.

The criticality of 700MW coal project was also recognized in a meeting with relevant stakeholders including the Power Division on October 24, 2019 and subsequent meetings on additional supply to KE from the national grid and it was principally agreed that a summary for the Cabinet Committee on Energy (CCoE) approval regarding pending tariff notification of 700MW coal project will be expedited, however, the outcome of that commitment is awaited.

KE has requested the Power Division to expedite the tariff notification for 700MW coal project critical to managing the growing power demand within KE's service area and its completion expeditiously.

According to KE the project has received all regulatory approval from Nepra, SEPA and CCP whereas around 216 acres of prime land has also been secured. The project was awarded the upfront tariff and generation licence by Nepra in August 2016 and May 2017 respectively and is considerably cheaper than generation from furnace oil or on RLNG. However, the tariff notification from the government is still awaited.

Considering the government policy of increasing utilization of local fuel sources, KE has also modified the design of the plant and the plant will be fully capable of running on local coal. Accordingly, once local coal is commercially available for use at KE plant, KE would operate the plant on local coal.

Keeping in view the supply-demand gap in KE system, which exists even after considering maximum possible off-take from national grid, it is imperative that the project works should commence immediately.

Therefore, immediate notification of tariff from the Ministry is necessary for successful implementation of the project in addition to securing its financing needs. Any further delay in the way of this project to achieve its target commercial operation date will be detrimental to meeting the power needs of Karachi.