Govt plans to hand over coal pricing to OGRA

To revisit imported coal supply agreements in bid to cut prices

Zafar Bhutta April 10, 2020

ISLAMABAD: The government is moving to place coal pricing within the purview of Oil and Gas Regulatory Authority (Ogra) as it plans to revisit the imported coal supply agreement in a bid to cut prices.

Currently, pricing of petroleum products, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) falls within the domain of Ogra and coal pricing would be a new addition for the regulator.

At present, the National Electric Power Regulatory Authority (Nepra) approves the coal supply agreement and determines the fuel cost component based on current coal prices. Officials told The Express Tribune that the Cabinet Committee on Energy (CCOE), in a recent meeting, was proposed that imported coal supply arrangements may be revisited on an immediate basis to save cost. However, it was pointed out that these projects were executed on a government-to-government basis under the China-Pakistan Economic Corridor (CPEC).

At present, all such imported coal-fired projects are under the CPEC framework, therefore, the committee was informed that the matter should be handled very carefully due to the sensitive nature of government-to-government arrangements. There are three companies running coal-based power plants which include Huaneng Shandong Ruyi Pakistan Energy, Qasim Electric Power Company and China Power Hub Generation Company.

Average fuel cost component for January-December 2019 was also presented during the meeting. It was informed that the average fuel cost component for Huaneng Shandong Ruyi Pakistan Energy was Rs7.11 per kilowatt-hour (kWh) (including inland freight), Rs5.12 per kWh (including local handling) for Qasim Electric Power Company and Rs5.87 per kWh (including local handling) for China Power Hub Generation Company.

The CCOE was informed that coal was being imported by these power plants through a supply agreement with individual companies. Nepra approves the supply agreement and determines the fuel cost component based on current coal prices.

Regarding coal price optimisation, the CCOE directed that it should be included in Ogra’s mandate to the extent of imported coal.

Furthermore, in case of any legislative changes required in the Ogra Ordinance, these would be presented for approval at the appropriate forum by June 30, 2020. In the event the legislative changes were not required, the action would be completed by April 30, 2020.

The CCOE was also informed that for the fuel cost optimisation of power plants, certain measures were required to be taken. These include conducting one-time heat rate (efficiency) test of all plants, if the efficiency is found better than the contract, then reset. If the efficiency is found same or worse, then there should be no change.

It was also informed that it would be part of negotiations with private independent power plants (IPPs) to lower the cost of re-gasified LNG supplied to the power sector by September 2020.

The cabinet body directed that in case of any violation of the power plants economic merit order, the case would be presented before the committee with reasons and the expected duration of the violation.

Published in The Express Tribune, April 10th, 2020.

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