NEPRA ditches PTI’s plea challenging higher tariff
Says extra risk involved in upfront tariff regime justifies 17% return
ISLAMABAD:
The National Electric Power Regulatory Authority (Nepra) has turned down the plea filed by Pakistan Tehreek-e-Insaf (PTI) leader Asad Umar challenging the higher tariff allowed for coal-based electricity generation in the country.
“The upfront tariff regime is relatively risky and such additional risk justifies 17% rate of return,” the regulator said in its decision after hearing arguments.
The decision will pave the way for Chinese investment in coal-fired power plants in Gadani and some parts of Punjab. The government is seeking to set up coal power plants of over 6,000 megawatts in Gadani to tackle the energy crisis.
After filing of the petition, the government had termed the PTI’s move an attempt to block the way of billions of dollars of Chinese investment in developing power plants.
While challenging the decision taken by Nepra to increase the upfront tariff of electricity that would be generated by consuming coal as a fuel, Umar, in his petition, called it an attempt to fleece the people.
According to him, Nepra revised the upfront tariff with a massive increase that would lead to a rise in tariff for the consumers, who were already reeling under the burden.
He argued that coal power houses got 9% to 10% rate of return globally, but in Pakistan a return of over 17% had been offered in violation of rules.
He stressed that Nepra had no authority to revise the upfront tariff and instead of taking the decision through parliament, the government struck deals behind closed doors for installing the power plants.
In its decision, the regulator, however, said the extra risk involved in the upfront tariff regime justified the 17% rate of return.
Coal-based independent power producers were new to the country and the sponsors would take technology risk, it said, adding 2014 was one of the worst years hit by circular debt, increasing the overall risk profile of projects being developed.
Earlier, Nepra while determining the upfront tariff in 2013 followed the international practice and agreed on 17% rate on equity (RoE) for imported coal and 20% for local coal. Unfortunately, no one opted for the 2013 upfront tariff that prompted the government to ask Nepra to revisit the return.
“The authority, therefore, decided to allow simple RoE based on generic drawdowns and other reference parameters that also ensures adequate rate of return at 17% for imported coal and 18% for local coal other than Thar coal,” the regulator said.
Published in The Express Tribune, November 23rd, 2014.
The National Electric Power Regulatory Authority (Nepra) has turned down the plea filed by Pakistan Tehreek-e-Insaf (PTI) leader Asad Umar challenging the higher tariff allowed for coal-based electricity generation in the country.
“The upfront tariff regime is relatively risky and such additional risk justifies 17% rate of return,” the regulator said in its decision after hearing arguments.
The decision will pave the way for Chinese investment in coal-fired power plants in Gadani and some parts of Punjab. The government is seeking to set up coal power plants of over 6,000 megawatts in Gadani to tackle the energy crisis.
After filing of the petition, the government had termed the PTI’s move an attempt to block the way of billions of dollars of Chinese investment in developing power plants.
While challenging the decision taken by Nepra to increase the upfront tariff of electricity that would be generated by consuming coal as a fuel, Umar, in his petition, called it an attempt to fleece the people.
According to him, Nepra revised the upfront tariff with a massive increase that would lead to a rise in tariff for the consumers, who were already reeling under the burden.
He argued that coal power houses got 9% to 10% rate of return globally, but in Pakistan a return of over 17% had been offered in violation of rules.
He stressed that Nepra had no authority to revise the upfront tariff and instead of taking the decision through parliament, the government struck deals behind closed doors for installing the power plants.
In its decision, the regulator, however, said the extra risk involved in the upfront tariff regime justified the 17% rate of return.
Coal-based independent power producers were new to the country and the sponsors would take technology risk, it said, adding 2014 was one of the worst years hit by circular debt, increasing the overall risk profile of projects being developed.
Earlier, Nepra while determining the upfront tariff in 2013 followed the international practice and agreed on 17% rate on equity (RoE) for imported coal and 20% for local coal. Unfortunately, no one opted for the 2013 upfront tariff that prompted the government to ask Nepra to revisit the return.
“The authority, therefore, decided to allow simple RoE based on generic drawdowns and other reference parameters that also ensures adequate rate of return at 17% for imported coal and 18% for local coal other than Thar coal,” the regulator said.
Published in The Express Tribune, November 23rd, 2014.