Hydroelectric power: Investor that quotes lowest tariff will win project bid

NEPRA shifts to power tariff based on competitive bidding

ISLAMABAD: In a major move, the National Electric Power Regulatory Authority (Nepra) has decided to switch to a tariff regime based on competitive bidding under which the private-sector investor that quotes the lowest tariff will win the bid for a power project.

“This is universally recognised as the fairest and most transparent method of determining tariffs,” said a statement issued Friday.

Nepra has taken the first significant step towards implementing its long-term vision of market-driven tariffs based on competitive bidding by approving the Request for Proposals (RFPs) of seven hydroelectric power projects with a cumulative capacity of 653 megawatts. Private-sector investors will undertake these projects after open competitive bidding to be held by the provincial power boards.

These boards will float Nepra-approved RFPs and invite private power companies to quote the lowest levelised tariff, which will be the sole criterion for winning the bids.

Until now, all tariffs for independent power producers (IPPs) in Pakistan have either been upfront or based on a cost-plus formula, which have often drawn criticism for lacking transparency.

The hydroelectric power projects whose RFPs have been approved include 135MW Taunsa power project, 188MW Naran project, 102MW Shigo Kas project, 99MW Arkari Gol project, 96MW Bata Kundi project, 21MW Ghorband Khwar project and 12MW Nandihar Khwar project.

In future, Nepra says it also intends to encourage competitive bidding for determining tariffs for other technologies including wind, solar and thermal power.

Published in The Express Tribune, October 29^th, 2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.