CCOE refuses to endorse IPP deal in haste

The Cabinet Committee on Energy (CCOE) on Thursday refused to approve in haste a deal reached with the independent power producers (IPPs).

The deal with 47 IPPs was submitted to the cabinet body on energy for approval. It was informed that there would be savings of Rs836 billion following the agreement with the IPPs.

However, committee members said that they could not accord approval in haste as a summary was not sent to them for review.

They sought some more time to read the document carefully before approving it. They said that legal opinion should be sought from the Law and Justice Division before approving the deal.

Therefore, the CCOE, which met under the chairmanship of Minister for Planning, Development and Special Initiatives Asad Umar, decided to seek the opinion of the Law and Justice Division.

The Power Division submitted the summary on the payment mechanism and agreement with the IPPs. It informed the committee that out of the 47 MoUs, the implementation committee had agreed on the payment mechanism with 44 IPPs.

The Power Division secretary briefed the committee on the proposed mechanism and it was decided that the committee would meet again on February 8 for final decision on the matter. The Power Division also presented the latest circular debt status and projections and briefed the committee on the situation from July 2020 to December 2020.

The committee noted that the circular debt accumulation was decreasing as a result of the circular debt management plan being implemented by the government. It directed the Power Division to timely issue monthly data for review by the committee.

During the meeting, it was told that the circular debt had been projected to rise to Rs2.587 trillion by June 2021, which stood at Rs2.3 trillion by the end of December 2020. The circular debt increased by Rs153 billion from June to December.

The Power Division said that Gencos’ payables to fuel suppliers stood at Rs100 billion and were expected to stand at the same level by June. The debt of Power Holding Private Limited is expected to be Rs977 billion by June 2021. It was further informed that payables to the IPPs stood at Rs1.225 trillion by end-December 2020, which were expected to rise to Rs1.51 trillion by June 2021.

Pipeline capacity

The cabinet body also decided to provide equal opportunity of pipeline allocation to the CNG sector on a three-month rolling basis.

New LNG terminals were struggling to seek allocation of pipeline capacity which appeared to be discriminatory to other sectors desiring to import LNG.

The Petroleum Division informed the CCOE in its meeting on Thursday that it had received various correspondences from the CNG sector, which wanted to import LNG as per the model approved by the Economic Coordination Committee (ECC).

It raised the issue of discrimination being meted out in the allocation of available pipeline capacity vis-à-vis allocation to new LNG terminals on the grounds that as per the natural gas TPA Rules 2018 and network code, their application is entitled for allocation of capacity on first-come-first-serve basis.

The CCOE decided that in order to provide a fair and level playing field to new LNG terminal, the existing available capacity in pipeline will be allocated to any applicant including CNG, meeting the requisite criteria for three months rolling basis till such time the new terminals achieve commercial operations date.

The CCOE in its meeting held on February 4, 2021 also considered the report of the sub-committee constituted by it regarding allocation of pipeline capacity to new LNG terminals.

The cabinet body, in an earlier meeting, had approved forming a sub-committee to deliberate on issues regarding allocation of pipeline capacity to new terminals and formulate recommendations.

The sub-committee held a meeting on February 3, 2021 wherein the issue of existing available pipeline capacity to new LNG terminals was discussed at length, based on which a report was prepared.

The CCOE took a decision based on the recommendations of the ministerial-level committee.

Published in The Express Tribune, February 5^th, 2021.

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