ISLAMABAD: Water and Power Development Authority (Wapda) has challenged National Electric Power Regulatory AUTHOIRTY (NEPRA) decision on hydroelectric tariff determination for FY 2022-23, accusing the power sector regulator of denying justified costs.
Wapda had sought increase of Rs 3.95 per unit on the basis of revenue requirement of Rs 123.315 billion for the FY 2022-23 whereas the regulator allowed an increase of Rs 2.72 per unit to generate revenue of Rs 84.925 billion, which irritated Wapda.
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WAPDA has provided the following rationale to challenge Nepra’s determination of September 6, 2023: (i) ignored statutory mandate and role; (ii) conflict of interest misconception; (iii) overlooking project benefits; (iv) financial viability threat; (v) protocol compliance; (vi) audited accounts; (vii) delayed payments; (viii) payment default impact; (ix) statuary mandate; (x) unilateral alteration of tariff structure; (xi) force majeure (e.g., natural calamities including floods and GLOFs); (xii) reopening past and close matters; (xiii) incorrect application of private sector principles; (xiv) misconceived benchmarks; (xv) O&M costs; (xvi) employees’ salaries and benefits; (xvii) post-retirement benefits; (xviii) administration costs; (xix) benchmarking; (xx) depreciation; (xxi) return on investment; (xxii) provision of future development, i.e., reduction in Dasu hydropower project cost and construction period, fixation of development periods for Mangla rehabilitation and Warsak rehabilitation, reduction of Capital Works in progress; (xxii) debt to equity ratio; (xxiii) essential post Commercial Operation Date (COD) costs incurred on Tarbela 4th Extension and Golen Gol HPP; (xxiv) reduction in the licensed capacity; (xxv) take or pay basis; and (xxvi) regulatory revenue gaps and Net Hydel Profits (NHP).
According to Wapda, in tariff determination, Nepra unilaterally decided to convert the tariff of seven small hydropower projects which have been in operation for a decade from “take or pay” to “take and pay” basis, citing a pretext of reduced efficiency. The petitioner submits that there has been no degradation or reduction in the efficiency of these projects.
Wapda argues that capacity tests are regularly conducted by CPPA-G in accordance with relevant provisions of the respective Power Purchase Agreements (PPAs). Therefore, Nepra’s determination that these projects are non-performing and must be converted to “take or pay” is erroneous.
Wapda had specifically requested Nepra to approve a total of Rs 22, 501 billion as revenue gaps accrued due to delay in tariff notifications and billing issues.
However, in the impugned tariff differential, Nepra approved a negative amount of Rs 2.768 billion as revenue gap without providing any clear rationale for the decision.
Moreover, Nepra did not take into account the audited financial statements from FY 2019-2020 to 2021-2022 when making this determination. The approved amounts are inconsistent with previous determinations of Nepra.
Copyright Business Recorder, 2023