Nepra slashes equity return of 12 power plants

Reduction in tariff to result in estimated saving of Rs182 billion

ISLAMABAD:

The National Electric Power Regulatory Authority (Nepra) has slashed the Return on Equity (ROE) and the Return on Equity During Construction (ROEDC) components of 12 thermal power plants in a bid to reduce the electricity tariff.

“Nepra has reduced the ROE and the ROEDC components of those 12 thermal power plants which were set up under Power Generation Policy 2002 having a cumulative net capacity of 2,412 MW,” said Nepra spokesman in a statement issued on Friday.

“The reduction in tariff will result in an estimated saving of Rs182 billion over the remaining life of the projects,” the spokesperson added.

Nepra took the decision in response to the tariff adjustment applications filed by the Central Power Generation Agency (CPPA-G) for reducing the ROE and ROEDC components of the 12 plants.

The CPPA-G had requested Nepra to revise the ROE and the ROEDC components on the basis of 17% return and fixed exchange rate of Rs148/US$ without dollar indexation for local equity and revised ROE and ROEDC components on the basis of 12% return with dollar indexation for foreign equity.

The authority under the prevailing rules and regulations admitted the applications and subsequently conducted a hearing on March 03, 2021 in which it deliberated on the applications.

Later, Nepra decided to revise the ROE and the ROEDC components for local equity on basis of 17% return and fixed exchange rate of Rs148/US$ without future indexation and the ROE and ROEDC components for foreign equity on the basis of 12% return with future dollar indexation.

Earlier in a landmark decision, Nepra had reduced the ROE component of three nuclear power generation plants of 931MW, including C-2, C-3 and C-4 and slashed the tariff by Re. 0.2515 per unit. This decision was to help save approximately Rs2.05 billion annually for next 25-37 years.

The nuclear power generation plants in line with Cabinet Committee on Energy (CCOE) decision of August 2, 2020 had filed petitions with Nepra for reduction in their ROE components on account of reduced ROE rate and freezing exchange rate to Rs148/dollar.

Nepra after a public hearing had decided to freeze the exchange rate at Rs.148/dollar and reduce the ROE from 15% to 14.5% for the remaining life of these projects. Last month, Nepra was informed that agreements with 30 out of 47 independent power plants (IPPs) have been signed.