ISLAMABAD: National Electric Power Regulatory Authority (Nepra) has refused to approve increase in levelized tariff of Neelum Jhelum Hydropower Project (NJHP) until the company gets Third Party Validation (TPV) of project.
“The Authority, in exercise of its powers under Regulation [4(3)] of the Nepra (Import of Electric Power) Regulations, 2017, has decided to allow the seller to continue to charge provisional tariff of Rs. 9.1184 per kWh on take and pay basis with must run condition which was made effective from October 17, 2019, the date of notification of the Authority’s order of August 19, 2019 and its further extension through Authority’s decision of March 30, 2021,” said the regulator in its determination.
According to the Neelum Jhelum Hydropower Company (NJHPC), the proposed project cost and reference tariff are based on the following assumptions. A change in any of these assumptions will necessitate a corresponding adjustment in the reference tariff: (i) the levelized tariff is to be applicable for a period of 30 years. The debt shall be serviced (repayment of principal and interest charges) in first 20 years; (ii) debt for the project consists of foreign relent loans and cash development loans by GoP and local commercial loans; (iii) debt to equity ratio of 74:26 ; (iv) an exchange rate of PKR 165/USD has been assumed. Indexation against PKR/ USD variations shall be permitted for all the project costs denominated in the foreign currency. Tariff components shall be respectively indexed for exchange rate variations as discussed under indexation adjustments; (v) Power Purchaser will compensate for the energy delivered prior to or before effective date of tariff determined in 2018. Payments will be invoiced to the power purchaser as per the mechanism specified in the PPA otherwise Nepra may instruct power purchaser for adjustment of such export of power against import of power by the power seller; (vi) power purchaser will bear hydrological risk; (viii) PPA will be structured as a take or pay contract whereby the Capacity Purchase Price will be payable to the project company regardless of the actual dispatch levels; (ix) Water Use Charge (WUC) and its indexation will be charged at the same rate as provided for in the approval of EGG letter No. F.I/11/2019 dated 25.03.2019 and Tripartite Agreement signed between WAPDA, Government of Pakistan and the Government of AJK; (x) Customs duties for import of plant, materials and spares and parts is assumed at 5% which will be adjusted as per actual payment at COD and no other import duties have been assumed; (xi) Only 6% withholding tax on EPC onshore works has been assumed; withholding tax on O&M cost is not assumed; and no assumptions has been made for any other taxes including sales tax and value added taxes on the EPC contract (both onshore and offshore works) and for the O&M cost. In case there is any change in taxes, etc., or additional taxes, fees, excise duty, levies, etc. are imposed, the project cost and reference tariff shall be adjusted accordingly; (xii) in case of any unintentional error or omissions, typographic errors, and any genuine assumption being overlooked, the same will be corrected, incorporated and advised to the Power Purchaser as soon as NJHPC becomes aware of it; (xiii) cost of working capital has not been assumed; (xiv) on the closing of the project costs after submission of final bill by the contractor, reference tariff will be adjusted to account for one-time adjustments to commensurate the depreciation component with final/closing costs of the project; and (xv) any additional indexation or concession allowed by the GOP, NTDG/CPPA-G/ NEPRA or any other government entity to any IPP will be allowed to NJHPC without any discrimination.
On June 26, 2021, Nepra conducted hearing on the tariff petition of NJHPC and made it clear that it would not now allow any adjustment in tariff until the company gets TPV done or seeks exemption of this condition.
According to Nepra, the provisional rate shall be subject to adjustment if the seller either gets a waiver of the requirement of TPV by ECNEC/relevant agency or conducts the TPV. Further, the seller is directed to file a tariff petition through CPPA-G after complying with either of the two options.
Nepra has already held that opinion which is reflected in the project’s tariff decisions of November 19, 2018 that as per the statutory mandate, the assessment of cost and resultant tariff is the exclusive domain of Nepra.
In the instant case, the Government of Pakistan through Ecnec has raised reservations on the project by issuing conditional approval of the PC-I. Being a government-owned project the Authority, cannot ignore such observations.
The Authority maintains that the seller has now two options either to get a waiver of the requirement of TPV by Ecnec/relevant agency or conduct the TPV and submit the same along with a tariff petition for the purpose of determination of tariff.
Nepra, however, is cognizant of the fact that TPV, which has not even started yet is a time consuming matter. Therefore, having considered the submissions of the seller, comments of the buyer and all the relevant documents, the Authority allows the seller to charge the provisional tariff i.e. R.s 9.1184/kWh on take and pay basis (must run) till the conditions are applied.
Copyright Business Recorder, 2021