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ISLAMABAD: The Power Division has reportedly finalised new draft Power Purchase Agreement (PPA) with Karachi Electric (KE) along with disputes, to be submitted first to the Economic Coordination Committee (ECC) and then Cabinet for approval, well-informed sources told Business Recorder.

Presently, KE is drawing over 1,100 MW electricity from the national grid, sans any formal agreement. The PPA between KE and National Transmission and Desptach Company (NTDC) expired in 2015, after which power is supplied to KE on transitional arrangements.

According to the Power Division, Rs 213 billion is receivable from KE as on June 30, 2021 due to subsidy dispute between the power utility and Finance Division.

On May 5, 2021 , the issue of new PPA came under discussion and the government sent a message to KE management through media that it will give a last chance to resolve disputes with government entities otherwise it will consider taking over KE. The government argued that it was already supplying over 1300 MW electricity to KE but being paid only for 650 MW of electricity.

Both the Federal Government and KE started negotiations on new PPA almost a year ago but it has not yet been finalized due to differences on payment mechanism of power being purchased by the KE, text of Tariff Differential Subsidy (TDS) and definition of base load.

The sources said, KE argues that payment against supply of power should be linked to payment of subsidy by the Finance Ministry, whereas Power Division wants payment to be kept separate from subsidy as release of subsidy is between KE and Finance Division.

KE, which has hired the services of a former officer of spy agency for "better coordination" with the Ministries, maintains that if subsidy is not paid by the Finance Division for two months continuously it will opt for net-off mechanism which is not acceptable to Power Division.

However, agreement has been reached between KE and CPPA-G on text of TDS.

The government (CPPA-G) argues that it is ready to guarantee 2000 MW electricity from national grid, with electricity also provided from Jamshoro power plant which is expensive.

KE, sources said, points out that on the one hand the government is asking to purchase expensive electricity and supply it to its consumers and on the other implementing CTBCM from 2023, raising the question of how would the power utility be able to compete with competitors.

At this feedback, the government, sources said, has advised KE to seek permission to establish its own generation plant. KE wanted to establish its own coal-fired power plant a couple of years ago but the government shelved it despite the fact that Nepra had approved its tariff.

SAPM on Power and Petroleum, Tabish Gauhar is resisting KE’s move of net-off mechanism saying that the power utility has to deposit its recoveries in a Master Account, which will be used for timely payments against the power being supplied from the national grid. When contacted KE spokesperson said, "KE and the Federal Government have been working closely on the Power Purchase Agreement (PPA) for the past several months and power utility is thankful for the continued support and understanding that it has received. This support has enabled matters to move forward in a positive manner. Both parties have discussed and reached an agreement on the remaining open items as well, which need to be approved by a higher forum such as the Economic Coordination Committee (ECC) of the Cabinet. "We are hopeful that this matter will be amicably closed soon for the continued benefit of Karachi and it's adjoining areas," spokesperson concluded.

Copyright Business Recorder, 2021

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