ISLAMABAD: Independent Power Producers (IPPs) have urged the Power Division to notify Nepra’s decision for change in Consumer Price Index (CPI) base year in Gazette of Pakistan without any further delay as their tariff component awaits adjustments since October 2020, well informed sources in National Electric Power Regulatory Authority (Nepra) told Business Recorder.
Independent Power Producers Advisory Council (IPPAC), in a letter to Power Division, a copy of which has also been sent to Registrar Nepra, referred to its letter of January 03, 2023 on the “gazette notification of the Nepra’s decision in matter of change in base year 2007-08 to 2015-16 for Consumer Price Index (CPI) for indexation of fixed and variable O&M (local) components of generation tariff whereby it has been requested to Power Division to direct the concerned department to notify the Nepra’s decision of March 10, 2021, regarding the change in CPI base year for indexation of tariff, in the Gazette of Pakistan without any further delay.”
IPPAC argued that this long outstanding issue of notification in the Gazette of Pakistan is causing serious challenges to all IPPs due to the impact of inflation, particularly during the last one year.
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In the absence of the Gazette notification, IPPs are unable to claim the entitled inflation adjustment in their local O&M tariff component since July 2020 which has resulted in significant unbilled amounts that are believed to impact on the cash-flows of the IPPs.
Nepra will allow the CPI indexation on the local O&M tariff component only when the determination is notified in the Gazette of Pakistan.
Therefore, IPPAC has once again requested Power Division to resolve this matter on priority and direct the concerned to notify the decision for change in CPI base year in Gazette of Pakistan without any further delay so that the tariff of IPPs can be rationalized and the billing of the relevant adjustments can be made accordingly.
Earlier, IPPAC in its letter had argued that Pakistan Bureau of Statistics (PBS) discontinued issuing the CPI-General (CPI-G) with the base year of 2007-08 from July 2020 onwards and alternatively National-CPI (N-CPI) with the base year 2015-16 was introduced. All the IPPs in Pakistan were using CPI-G with the base year 2007-08 for indexation of their local O&M components of generation tariff.
Accordingly, Nepra issued decision for change in CPI-G base year whereby it ordered the revised index for tariff of the IPPs to cater to the indexation with N-CPI of base year 2015-16 applicable for future indexations with effect from October 01, 2020.
The decision for change in CPI base year was made in March 2021 but it has not been notified in the Gazette of Pakistan as yet.
“Since the decision for change in CPI base year is not notified in the Gazette of Pakistan; therefore, Nepra is not following it while issuing the quarterly tariff indexation of the IPPs.
Rather it is approving the local O&M (fixed and variable) tariff component of IPPs on a provisional basis using the last available CPI-G of base year 2007-08 pertaining to June 2020,” IPPAC said, adding that the provisional approved tariff components will be adjusted as per the decision for change in CPI base year once it is notified in the Gazette of Pakistan.
In light of the decision for change in CPI base year, the local O&M (fixed and variable) tariff component of the IPPs needs adjustment since October 2020. The adjustment in these tariff components has accumulated into huge amounts which IPPs are unable to invoice and it is believed to impact the circular debt significantly if not addressed on timely basis.
Copyright Business Recorder, 2023