Power firm draws flak for seeking tariff hike

Other companies oppose petition seeking increase of over Rs3 per unit for hydropower

ISLAMABAD:

The Punjab Power Development Company Limited (PPDCL) on Tuesday came under fire from other power firms and faced questions from the regulator for seeking an increase in electricity rates by more than Rs3 per unit.

Power-sector regulator, the National Electric Power Regulatory Authority (Nepra), held a public hearing to review the motion filed by PPDCL for Chianwali, Marala and Pakpattan hydroelectric power projects. During the proceedings, the petitioner pointed out that the total fixed charge was Rs7.4316 per kilowatt-hour (kWh), amounting to Rs371.54 million, and sought an upward revision to Rs10.9133.

Officials of Gujranwala Electric Power Company (Gepco), Multan Electric Power Company (Mepco) and Central Power Purchasing Agency-Guarantee (CPPA-G) strongly opposed any tariff revision for hydropower plants, saying it would increase the cost of electricity for consumers and would pave the way for other hydroelectric power companies to seek a tariff review.

PPDCL officials asked for a reduction in plant factor and revision in canal closure factor from 20 to 34 days. They said Punjab had initially intimated that canals would be closed for 20 days but it did not include the unscheduled closure of canals. PPDCL sought a reduction in the annual energy benchmark from 49.995 gigawatt hours to 34.045 GWh.

Based on the engineering, procurement and construction (EPC) contractor's design, PPDCL in its petition requested for adoption of an estimated annual generation of 43.067 GWh at a 65.5% plant factor, but the regulatory authority in its determination foresaw a remodelling of the 49.995GWh benchmark at a capacity factor of 75.5%.

It said actual water flows/discharges reflected reductions around 26% from the historical water flows/discharges adopted in the feasibility study of Marala hydroelectric power plant.

While calculating the estimated generation, in the feasibility study and EPC contract, no scheduled and forced outage factor was accounted for. As against the actual 34-day annual canal closure, 15 days and 20 days were adopted in the feasibility study and EPC contract design, respectively.

After accounting for scheduled and forced outage, extended canal closures and low water flows, the annual energy benchmark was estimated at 34.045 GWh, at 51.4% capacity factor, which was much higher versus run-of-canal hydropower stations operated by Wapda.

The Punjab power firm also sought permission for pass-through of insurance capped at 0.8% of EPC cost and requested a reduction in the operation insurance cap from 1.35% to 0.8%, or actual cost, whichever was lower.

PPDCL has agreed with the power purchaser to reduce the insurance cap from 1.35% to 0.8% of the EPC cost. To compare the actual insurance cost, the company said the cost cap of $0.2772 million may be translated into Pakistani rupees at the US dollar conversion rate as at the valuation date of insurance cover for the related year.

The petitioner said it had agreed with the power purchaser to change the tariff structure from take-or-pay to take-and-pay with the most-run and hydrological risk to be shifted from the buyer to the seller.

All fixed and variable operation and maintenance (O&M) components, irrespective of foreign or local origin, will be indexed annually with respect to the National Consumer Price Index (NCPI).

The upward US dollar indexation of the return on equity (RoE) will be discontinued from January 1, 2026 and exchange rate will be fixed at Rs280.55/US dollar. Rupee appreciation will be passed on annually.