IPPs to get Rs1.3tr in capacity charges

Rupee-dollar rate, coal prices, RLNG cost major factors that determine capacity payments

Zafar Bhutta August 29, 2023
design: mohsin alam


Consumers are set to cough up Rs1.3 trillion in capacity payments to idle power plants in the current financial year, said officials in a meeting of the Senate Standing Committee on Power on Monday.

The government has struck binding agreements with power plants according to which they will be paid capacity charges even if government companies are unable to take electricity supplies from them.

At a recent public hearing held by the National Electric Power Regulatory Authority (Nepra), electricity companies informed the regulator that consumer demand had dropped owing to weather conditions and the shutting down of many industrial units due to exorbitant power costs.

As power distribution companies reduced the intake of electricity, the producers shut down their plants, resulting in imposition of high capacity charges on consumers.

In current financial year 2023-24, the electricity consumers will be paying Rs1.3 trillion in capacity costs to those power plants that have remained shut. The meeting of the Senate Standing Committee on Power was held at the Parliament House, chaired by Senator Saifullah Abro.

The committee discussed the unprecedented increase in consumer bills that triggered nationwide protests, prompting the prime minister to call an emergency meeting to discuss the crisis. Committee chairman asked about the capacity charges being paid to independent power producers (IPPs). In response, officials apprised the meeting that capacity payments would stand at Rs1.3 trillion in the current financial year.

The rupee-dollar conversion rate, imported coal prices, cost of re-gasified liquefied natural gas (RLNG) and Karachi Inter-bank Offered Rate (Kibor) were the major factors which determined the capacity payments, they elaborated. Senator Saifullah Sarwar Khan Nyazee questioned about the unchecked electricity theft and allocation of power subsidy.

Responding to that, the officials stated that approximately Rs467 billion worth of electricity theft had been detected and around Rs976 billion subsidy had been provided in financial year 2023.

The committee directed the Power Division to provide a list of defaulters and the outstanding dues owed to each power distribution company (DISCO) in the next meeting.

Senator Abro cited IPPs as the primary reason behind the unjustified electricity costs. He pointed out that the IPPs had inflated invoices of three power plants, a fact acknowledged by the Power Division secretary.

He emphasised that unless the IPPs’ issue was resolved, the electricity crisis in the country could not be effectively tackled. The Senate panel also discussed a public petition filed by Ashraf Ansari about non-payment of group life insurance to the retired employees of Water and Power Development Authority (Wapda).

Relevant officials contended that group life insurance had been provided in Khyber-Pakhtunkhwa under the Khyber-Pakhtunkhwa Civil Servant Retirement Benefit and Death Compensation Act 2014. However, they said, there was currently no law that could serve as a basis for providing group life insurance to Wapda employees.

After detailed deliberations, the Senate committee decided to amend the relevant Act to resolve the issue of Wapda employees. Regarding the implementation of recommendations relating to the 765-kilovolt Dasu-Mansehra-Islamabad transmission line (Lot-I) and consultant GOPA Intec, officials of the Power Division revealed that a committee had been constituted to analyse the bidding process of Lot-I and investigate alleged irregularities on the part of GOPA Intec.

A comprehensive report would be submitted to the committee within a month, they added.

The Senate panel also discussed the 765kV Dasu-Mansehra-Islamabad transmission line (Lot-II). After comprehensive deliberations, it unanimously decided that Harbin Electric International had been disqualified from the Lot-II project as irregularities had been unearthed. The Power Division may take action against the company and GOPA Intec as per discussions in the previous committee meeting.

The meeting was attended by Senator Fida Muhammad, Senator Bahramand Khan Tangi, Senator Saifullah Sarwar Khan Nyazee, Senator Prince Ahmed Umer Ahmedzai, Senator Sana Jamali, Senator Haji Hidayatullah Khan, Senator Asad Ali Khan Junejo, Power Division’s Additional Secretary Arshad Majeed and other senior officers of relevant departments.

Published in The Express Tribune, August 29th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.