ISLAMABAD: Ministry of Privatisation has proposed alteration in Power Division’s draft summary on K-Electric (KE) issues and associated agreements including Power Purchase Agency Agreement (PPAA), Interconnection Agreement (ICA), and Tariff Differential Subsidy (TDS) to be signed between GoP and the power utility company, well informed sources in Privatisation Commission told Business Recorder.
Power Division shared the summary on the basis of recommendations of Shahid Khaqan Abbasi led Committee for comments from concerned stakeholders.
The caretaker Prime Minister, has, however, asked Power Division to seek investment commitments from the power utility company prior to signing the proposed pacts.
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The draft summary for the ECC of the Cabinet, has been examined in Privatisation Commission/Division and following comments offered in terms of Rule 8 of Rules of Business, 1973:
Implementation Agreement (IA), relating to KESC, of November14, 2005 contained Article XI (Clause 11.1) wherein it was mentioned that “GoP shall facilitate the Company in its efforts to enhance its generation capacity by an amount of 1000 MW in excess of the maximum permitted capacity”. This Article was subsequently substituted in the Amended Implementation Agreement of November 13, 2009 while Article 8.9 was inserted wherein it was mentioned that “GoP shall cause NTDC to enter into a Power Purchase Agreement (PPA) with the Company for sale of up to 650 MW of electrical power which is reasonably required to meet the requirements of the Company for a period of not less than five years.”.
In the proposed PPA, KE will get a firm power supply commitment of 1000 MW from national grid while additional supplies shall be made out of available pool on pro-rata basis.
This arrangement shall be for a period of 10 years and during this period KE shall mobilize its own resources to add more power. However, no mechanism for enforcement of KE adding more power by utilizing its own resources has been provided.
KE’s Indicative Generation Plan (IGP) proposal includes projects with a cumulative baseload capacity of 3000 MW as future capacity addition to be undertaken in the next 10 years besides the proposed 1182 MW of renewable capacity addition under NEPRA approved IGCEP.
It was mentioned that Power Division shall constitute a committee to periodically review the progress on indicated initiatives and these commitments shall be subject to regulatory review and approvals which, as per Power Division, provide an additional enforcement mechanism. This IGP is not part of any of the proposed agreements and thus carries no legal value.
However, enforcement mechanism, as mentioned by Power Division, lacks clarity and needs to be incorporated in the Power Purchase Agreement to provide it with a force of law as the GOP may be faced with a situation similar to the Implementation Agreement (2005) whereby a commitment to enhance KE’s generation capacity by an amount of 1000 MW remained unfulfilled, with no consequences, and later omitted from the Amended Implementation Agreement (2009).
Council of Common Interests (CCI), on a summary submitted by erstwhile Ministry of Water and Power (MoWP) titled “Equitable Distribution of Electricity,” on November 8, 2012decided that “the Council while approving recommendations of the committee advised that modalities for withdrawal of 350 MW from KESC and financing of oil bill required to be provided to KESC for activating its idle capacity may be worked out.
The sale purchase agreement of KESC also needs to be looked into to determine the responsibility of KESC for adding to generation. The same committee may also include Principal Officer, Finance Division and a representative of MoP&NR as members. The decision of the committee be implemented forthwith and a progress report be submitted in the next meeting of the CCI.
The draft summary is silent vis-à-vis implementation of the decision of CCI as to whether this decision still holds as decision of CCI which can only be annulled/modified by a court of law or by a resolution in Joint Sitting of Parliament as provided in Article 154(7) of the Constitution.
It is not clear whether the Power Division has consulted CCI and/or the Task Force considered the legality of this CCI decision besides seeking opinion of Law and Justice Division: (a)
On Mediation Agreement, Privatisation Ministry has proposed that instead of Ashtar Ausaf Ali, ASC, acting as a sole mediator, the mediators shall comprise of: (i) Ashtar Ausaf Ali, ASC; (ii) Attorney General or an Additional Attorney General; and (iii) one nominee of KE.
In case of resignation, or for any other situation resulting in disassociation of Ashtar Ausaf Ali, ASC from the mediation process, the agreement is silent about the method of his replacement and may require a fresh agreement which would be time-consuming.
It is proposed that a clause may be inserted providing a method of appointment of replacement of Ashtar Ausaf Ali, ASC whereby the replacement may be appointed by the “parties” in consultation with each other; and It is proposed that the TDS Agreement may be signed by Finance Division; and (b) In clause 5(b) of the Mediation Agreement, the Confidentiality Agreement is mentioned, however the Form/Format is not attached with the said agreement.
Copyright Business Recorder, 2023