ISLAMABAD: Five independent power producers (IPPs) have made an exorbitant profit of over Rs40 billion in the past seven years.
The shocking revelation was made in a meeting of the sub-committee of Senate Standing Committee on Power, chaired by Senator Nauman Wazir Khattak on Wednesday.
The parliamentary body recommended the launch of criminal proceedings against the IPPs, confiscation of their assets and recovery of looted money if they were found reluctant to cooperate.
The National Electric Power Regulatory Authority (Nepra) acknowledged that the five IPPs registered windfall gains of Rs40.175 billion over the past seven years. These power plants got profit in the range of 35-40% compared to the permitted return on investment of 15%.
The committee chairman revealed that Atlas Power recorded a profit of Rs9 billion, Nishat Power earned Rs7 billion, Attock Gen Limited Rs11 billion, Nishat Chunian Power Rs7 billion and Liberty Power Rs5 billion. Only Hub Power faced loss and its return was 12%. The committee chairman, however, emphasised that the IPPs would be given the right of being heard.
The Nepra chief pointed out that a power producer had obtained stay order from the Islamabad High Court but he assured senators that efforts would be accelerated to get the stay order vacated and start hearing on the matter.
Tug of war
Meanwhile, the Power Division and Sui Northern Gas Pipelines Limited (SNGPL) have been locked in a tug of war over liquefied natural gas (LNG) supply to power plants.
Pakistan has a firm LNG supply agreement with Qatar and SNGPL wants LNG-based power plants to run smoothly in order to fully consume the available LNG. However, the Power Division has refused to allow these plants to operate because of the economic merit order.
“We will operate plants on merit,” remarked Power Division Secretary Irfan Ali while speaking at a meeting of the sub-committee of Public Accounts Committee (PAC).
SNGPL representative Jawad Naseem said these power plants should be operated on a “must-run basis”. Owing to that, three gas fields have been shut down to ensure a smooth flow of imported gas and avoid damages.
The government is also working on a plan that can empower Nepra to pass on tariffs to the consumers without involving the federal government in order to avoid delay.
The delay in determining and notifying the tariffs had caused a build-up of circular debt. The debt was swelling Rs380 billion to Rs450 billion annually. However, the pace has slowed down now.
The circular debt stood at Rs829 billion at the end of June 2019 compared to Rs570 billion a year ago, with an increase of Rs259 billion.
The secretary informed the committee that an additional recovery of Rs122 billion had been made from electricity consumers over the past six months. Of that, the impact of tariff increase was 20-30% whereas the remaining recovery was due to better efficiency and loss reduction by the power distribution companies.
“We are going to draw a line to contain the circular debt through improvement in the recovery of bills and better efficiency,” he added. The committee was informed that a surcharge of Rs0.43 per unit was imposed on power consumers. The collection in that regard was being deposited in an escrow account and was also being used to pay off Rs82 billion worth of loans of Oil and Gas Development Company (OGDC).
The committee was told that the power distribution system needed more investment.
The Power Division secretary pointed out that there were hurdles in the way of settling the issue of outstanding bills between K-Electric and Sui Southern Gas Company (SSGC).
“We have requested for settling the liabilities’ issue through an arbitrator,” he said, adding that if the mechanism was agreed upon, K-Electric would go ahead with its stake sale to Shanghai Electric Power.
A retired judge of the Supreme Court has been proposed as the arbitrator.
The secretary said the audit of K-Electric had not been done for the past three years as the power utility did not accept the revised tariff and got stay order from court.
SSGC, the National Transmission and Despatch Company (NTDC) and Central Power Purchasing Agency (CPPA) have to recover Rs123 billion from K-Electric. This has been shown as a disputed amount.
Shanghai Electric agreed in the share purchase agreement that it would be responsible for the liabilities but disputed liabilities had not been placed before the Chinese company.
Published in The Express Tribune, August 22nd, 2019.