Sahiwal plant sues NEPRA over price

HSRPEL seeks nod for costlier coal from preferred supplier, raising cost concerns

LAHORE:

The Sahiwal Coal Power Plant (Huaneng Shandong Ruyi Pakistan Energy Ltd - HSRPEL) has filed a civil suit against the Central Power Purchasing Agency (CPPAG) and the National Electric Power Regulatory Authority (NEPRA), seeking to bypass the "lowest available price" rule for coal procurement. The power producer wants approval for costlier coal supply from a preferred supplier at a pre-agreed discount rate, a move critics warn could cost electricity consumers millions of dollars annually.

According to documents available with the Express Tribune, HSRPEL claims that under the Private Power and Infrastructure Board (PPIB) Implementation Agreement and provisions of the Power Purchase Agreement (PPA), it is entitled to procure fuel under mutually agreed contractual discounts with suppliers. The company maintains that this arrangement formed part of its original financial model and ensures long-term supply security at stable prices.

However, CPPAG and regulatory officials cite Rule 5 of the Public Procurement Rules, 2004 and the Competitive Bidding Guidelines for Independent Power Producers, which require all fuel procurement to be made at the lowest evaluated price available in the market at the time of purchase. This safeguard exists to protect public interest, given that the cost of fuel is passed directly to consumers through the tariff mechanism.

HSRPEL argues that NEPRA has no authority to interfere in its contract formation process, insisting that price negotiations are solely between the plant and its coal supplier. Legal and regulatory experts counter that this is not the legal scheme under Pakistan's power sector laws, which impose a statutory duty on power producers to secure the best bargain to protect consumers from inflated tariffs.

Section 31 of the NEPRA Act requires that tariffs only allow the recovery of costs "prudently incurred" to meet customer needs. While formula-based tariffs for over a year may not require separate prudence assessments, competitive procurement remains the baseline safeguard.

NEPRA's decision of June 26, 2025, reinforced the principle that suppliers offering the highest discounts help keep electricity affordable. Approving HSRPEL's request, experts warn, could set a precedent for other coal-based Independent Power Producers to bypass competition, undermining transparency and locking in higher prices.

Legal observers also note that the civil suit may face jurisdictional hurdles under the Specific Relief Act and could fall outside civil court's authority. Documents annexed to the suit also do not appear to support the power producer's stance that it had CPPAG's carte blanche. The terms of the No Objection Certificate relied upon by HSRPEL require it to "ensure and adhere to the practices which are efficient and, to the extent consistent with Prudent Utility Practice".

Recently, while approving the June 2025 tariff for China Hub Power, NEPRA also directed the issuance of fresh bidding to secure discounts over the index, as the current Coal Supply Agreement offers no discount.

Permitting procurement without competition would create issues of transparency and erode public trust in how fuel costs are managed. Experts said NEPRA must demonstrate resolve by enforcing the "prudently incurred costs" principle and ensuring that any coal supply arrangement passes a rigorous transparency test.