ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet is said to have expressed concerns over higher generation cost of K-Electric (KE), seeking a detailed plan of cost rationalization, well informed sources told Business Recorder.

On June 21, 2023, during the ensuing discussion, Power Division shared detailed calculations and justification for the case and highlighted that Finance Division had agreed with the proposal. Secretary Power Division requested the ECC for modification in proposal of the summary to be considered as “Rs. 75.379 billion” instead of “Rs. 79 billion”. The ECC endorsed the modification on the justification given by the Secretary Power.

The ECC shared concerns over the KE tariff differential impact on the consumers. Minister for Commerce Syed Naveed Qamar observed that there was a need to bring down the cost of generation. He inquired from KE if there was a detailed plan available for reduction in generation cost in KE basket to reduce burden on fiscal space.

ECC approves recovery of Rs1.52 per unit surcharge from KE consumers

Minister of State for Petroleum Musadik Malik also emphasized that efforts should be taken for reduction in generation cost in K-Electric basket.

Secretary Power Division stated that Prime Minister Shehbaz Sharif had constituted a taskforce to resolve all pending issues pertaining to the KE and a separate committee was also working on Expression of Interest (EoI) by KE for Jamshoro Unit-1 on Thar coal. Secretary Power Division shared that the taskforce had concluded its recommendations and a roadmap would be presented to the ECC.

The ECC approved notification of quarterly tariff adjustment proposed by the Power Division to “release and utilize available budget of Rs.76.379 billion as an advance subsidy during FY23 for onward release to CPPA-G against KE’s Tariff Differential Subsidy (TDS).” Detailed claims and invoices for the KE TDS would be submitted after due verification and reconciliation.

The ECC was also informed that since FY 2018-19, the KE had stopped paying CPPA-G against power purchase invoices citing clause 9.3 (A) of Power Purchase Agreement, signed between the KE and GPPA-G. This agreement expired in 2015; however, power was continued to be supplied to the KE.

Relevant Paras are as follows: (i) KESC shall pay NTDC (CPPA) payment against the relevant invoice for each billing period equal to the total value of the invoice including Sales Tax minus the amount of Tariff Differential Subsidy as calculated under above on or before the 15th day following the delivery of such invoice; and (ii) the amount of Tariff Differential subsidy shall be paid directly to NTDC by MoF on behalf of KESC on or before the 15th day following the delivery of such invoice to KESC.

KE, in its letter of March 10, 2022 stated that non-payment was due to pending subsidies receivables from Government of Pakistan. The KE’s outstanding payable towards CPPA-G had reached Rs. 448 billion as of Sept 2022 (including mark-up), and this was being further added by around Rs.15 billion on monthly basis.

Power Division submitted following proposals for consideration of ECC: (i) approval of surcharge of Rs. 1.52/unit to be recovered in 12 months, in terms of section 31 sub-section 8 of NEPRA Act, for recovery of Rs 24.5 billion and remaining amount of Rs. 250.7 billion may be approved as TDS; (ii) Power Division may be authorized to (a) file a motion before NEPRA for incorporation of above in the Schedule of Tariff determined for the Quarterly April to June 2022 or incorporate in the latest Schedule of Tariff being determined by NEPRA for the Quarter July to September 2022; and (b) upon approval of NEPRA, to notify the SoT in the official gazette by way of modification in SRO Nos. 575 (1)/ 2019 as modified from time to time; (iii) to notify that surcharge as approved above collected by K-Electric shall be remitted to CPPA-G immediately under intimation to GoP; and (iv) release and utilize available budget of Rs.79 billion as an advance subsidy from demand No 33 IB No.9050 during FY 23 for onward release to CPPA-G against the KE TDS. Detailed claims and invoices for KE TDS shall be submitted after due verification/ reconciliation.

Copyright Business Recorder, 2023