Power companies give Rs52b in advance to independent power producers

Regulator voices concern over the payment, seeks relevant record

ISLAMABAD:

Power distribution companies have made an advance payment of Rs52 billion to the independent power producers (IPPs) in the wake of pressure from the government that is seeking to reduce the circular debt and meet the commitment made to the International Monetary Fund (IMF).

The disclosure was made during a public hearing conducted by the National Electric Power Regulatory Authority (Nepra) on Thursday to determine the tariff for the Islamabad Electric Supply Company (Iesco).



The regulator took a serious notice of the matter and issued orders for submitting the relevant record of power companies.

Iesco officials told the regulator that they had deposited Rs10 billion from the company’s profit in the accounts of Central Power Purchasing Agency (CPPA). Payments for the supply of electricity had already been made to the CPPA, they said. CPPA is a power purchasing agency that buys electricity from the producers and supplies it to the distribution companies.

Former member energy of the Planning Commission disclosed during the hearing that power distribution companies had deposited in advance a cumulative amount of Rs52 billion in the accounts of CPPA to keep circular debt at Rs300 billion following directives of the Ministry of Water and Power.

Nepra members told representatives of Iesco and other companies to bring the directive of the water and power ministry that forced them to make the advance payment.



They wondered that on the one hand power companies had no money to install new transformers and consumption reading meters to facilitate the consumers but on the other hand they were making huge advance payments from their distribution margins.

After receiving the advance from the distribution companies, the CPPA paid the money to the independent power producers, Nepra Chairman Tariq Sadozai said, adding the distribution firms were only bound to pay for electricity supplied to them.

Iesco tariff

At the close of hearing, Nepra reserved judgment on the request for increase in multi-year power tariff in the range of Rs0.50 to Rs2 per unit.



Chairman Sadozai expressed concern over the poor distribution service and said cables were dangling in different areas of Rawalpindi, though Iesco was an efficient company.

Iesco representatives gave the assurance to the regulator that the company would spend Rs70 billion in the next five years to reduce losses by 8%.

K-Electric tariff

On the request for increase in K-Electric tariff despite a drop in furnace oil prices, the regulator gave the go-ahead for a 54-paisa increase per unit on account of fuel price adjustment for October. The higher tariff will be recovered from the consumers in electricity bills of next month.

Nepra also voiced concern over the rise in power generation cost despite the sharp decline in international oil prices.

K-Electric sold over 1.57 billion units in October with an additional cost of Rs851 million. According to the company representatives, it purchased electricity from the National Transmission and Dispatch Company at a cost that was higher by Rs1.93 per unit compared to September which led to the increase in tariff.

Published in The Express Tribune, December 18^th,  2015.

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