Major holes in IPP tariff deals revealed

The Senate Standing Committee on Power was apprised on Tuesday of major shortcomings and negligence in offering tariff to Independent Power Producers (IPPs), such as the lack of any technology studies or tests.

During a committee meeting, chaired by Mohsin Aziz, Special Assistant to Prime Minister on Power and Vice Chairman of Prime Minister's Task Force on Energy Muhammad Ali briefed the participants about the issues related to the IPPs, and future initiatives.

Senator Aziz said that details of the IPPs’ rate of return, heat rate and audit etc had not been provided to the committee. He noted that the contracts with five IPPs had been terminated; therefore, the committee wanted to know about the future of the remaining IPPs.

Ali informed the committee that the government conducted a study on IPPs in 2019 due to high electricity costs, with the report released in 2020. He added that, after accounting for returns on investment, IPP profits exceeded 27%.

"Due to budget constraints, no assessment of the technology used by the IPPs in Pakistan was conducted. Additionally, the heat rate and efficiency tests were not performed. Nepra [National Electric Power Regulatory Authority] approved tariffs for these IPPs without verifying their heat rates," he said.

Ali informed the Senate panel that when Nepra attempted to conduct efficiency and heat rate audits, the IPPs obtained stay orders from the courts.

He also mentioned that all IPPs would eventually transition to a "take or pay" model, with negotiations expected to take an additional three months.