Pressure tactics: PEPCO stops paying dues to IPPs

Power producers claim they are receiving 50% of the monthly bill.

ISLAMABAD: In a bid to pile pressure on independent power producers (IPPs) to withdraw their notices, Pakistan Electric Power Company (Pepco) has stopped paying routine dues to the nine IPPs which asked the government and the Central Power Purchasing Agency to release sovereign guarantees due to default on payment of Rs31 billion by Pepco.

Sources told The Express Tribune that these IPPs with a power generating capacity of 1,800 megawatts were denied routine payment of dues by Pepco on August 30 and on Monday, the first working day after Eid holidays.

Before Eid, the IPPs had called for invoking sovereign guarantees after Pepco failed to meet contractual obligations. Independent Power Producers Advisory Council Chairman Abdullah Yousuf, at a press conference, had also warned that all IPPs would be forced to shut down due to the financial crunch if immediate funds were not provided to ease the inter-corporate debt problem. Besides the nine IPPs, other power producers are also expected to serve notices on the government for payment of outstanding dues.

IPPs claim they are running on day-to-day basis with power bill to Pepco estimated at Rs56 billion per month but they are receiving 50 per cent of the amount.

The government pays Rs360 billion per year to the power sector including Rs190 billion in subsidy and Rs170 billion to deal with structural issues of Pepco. Over the last three years, the government has paid Rs1 trillion under these two heads. At present, Pepco is to pay Rs280 billion to power companies, of which 29 IPPs are to receive Rs211 billion. Out of this amount, Pepco is to pay Rs130 billion to Hubco and Kapco and the remaining to other IPPs.

Published in The Express Tribune, September 6^th,  2011.