Govt to extend scope of talks with IPPs to cut tariff

Decides to negotiate with hydel, gas-based IPPs to save costs for consumers

ISLAMABAD:

As electricity prices continue to surge, the government has decided to extend the scope of negotiations with independent power plants (IPPs) to cover hydel and gas-based projects as well in an effort to slash tariffs.

Earlier, the Pakistan Tehreek-e-Insaf (PTI) government had started negotiations with the IPPs to review the dollar indexation clause. A cap was placed to control the electricity prices rising with further depreciation of the rupee.

The current caretaker government has continued negotiations with wind energy producers. Now, it has decided to talk to hydel and gas-based IPPs as well.

It directed the Power Division in a recent meeting of the Cabinet Committee on Energy (CCOE) to come up with a separate summary.

The cabinet body told the Power Division to initiate a separate case for engaging with the remaining IPPs, including those dealing with hydel power that did not sign a memorandum of understanding (MoU).

During discussions, according to sources, CCOE members noted that the scope of negotiations should not be restricted to wind or bagasse-based power plants but hydel and gas-fired IPPs may also be included.

They observed that since the summary carried a proposal for extending the scope to the remaining bagasse-based plants, therefore, a separate summary would be required rather than adding hydel and other IPPs to the existing summary. The CCOE agreed to the proposal.

The energy committee was informed that the Power Division had submitted a summary titled “Implementation of Master Agreements and PPA amendments with Wind Power Producers” on May 25, 2023. The CCOE considered the summary and directed the Power Division to chalk out a new strategy to continue to engage with 14 wind power producers to achieve savings for consumers and reduce costs.

Read Unaffordable electricity

To comply with the CCOE directive, the Power Division notified a committee to negotiate with the wind energy producers.

The Power Division said that Chiniot Power Limited, an IPP run on bagasse, did not agree during earlier negotiations to convert its MoU into a binding agreement in financial year 2020-21.

However, the IPP has now shown its intention to renegotiate and initiate meaningful discussions with the Central Power Purchasing Agency-Guarantee (CPPA-G) to resolve its disputes.

Earlier, MoUs were signed with 47 IPPs in the wake of negotiations during 2020. Later, an implementation committee succeeded in converting 46 MoUs into initial agreements for CCOE’s approval.

Of the 46 IPPs, binding agreements were reached with 32 IPPs and payments were made after taking approval of the CCOE and the Economic Coordination Committee (ECC).

The CCOE authorised the Power Division to devise a new strategy to continue its engagements with 14 wind power producers. The Power Division was of the view that the committee constituted for talks with the wind energy producers could also engage in negotiations with Chiniot Power to evaluate the company’s proposal and place recommendations before the CCOE.

It said that the committee may recommend possible options while keeping proposals non-discriminatory for other bagasse-based IPPs.

Published in The Express Tribune, February 8^th, 2024.

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