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ISLAMABAD: The Power Division has reportedly finalized new Power Purchase Agency Agreement (PPAA) and Inter-Connection Agreement (ICA) with Karachi Electric (KE) for supply of 1,400 MW electricity to the latter, but disagreement still exists on base load versus firm capacity and Late Payment Surcharge for regulatory delays between the two parties, well informed sources told Business Recorder.

Sharing the details, sources said a Power Purchase Agreement (PPA) was signed with KESC (now K-Electric) by NTDC on January 26, 2010 for sale purchase of power up to 50 MW. The agreement was effective for 5 years till 25 January 2015.

Sindh High Court in suit No 205 restrained the Government and NTDC from interfering in the functioning of power purchase agreement and passed an order to NTDC to continue to supply electricity to KESC on 6 Feb 2014.

The Cabinet Committee on Energy (CCoE), in its decisions of June 19, 2020 and August 27, 2020 approved supply of additional power to K-Electric from National Grid in addition to existing supply of 650 MW.

Power Division finalises new draft PPA with KE along with disputes

Pursuant to the directions of the CCoE, multiple meetings were held between the Finance Division, Power Division, CPPA-G, NTDCL and K-Electric to finalize PPAA, ICA and TDS agreements for supply of power from national grid to K-Electric including existing supply of 650 MW.

The final draft PPAA, ICA and TDS agreements, duly initialed by the parties have also been attached with the summary of Power Division.

According to sources, K-Electric has agreed to provide a Standby Letter of Credit (SBLC) backed by Master Collection Accounts as security against payment to CPPA-G under the PPA, draft of which would also be shared with the CCoE.

Despite substantial consensus on the drafts of the three agreements a few areas have not been agreed with KE. These include the issue of base load verses firm capacity in 1CA and late payment surcharge on account of regulatory delays in TDS agreement.

On the issue of base load verses firm capacity, NTDC argued that K-Electric is to be treated at par with the rest of the country on pro-rata basis in line with Grid Code 2005, and if there is any shortfall of available power in NTDC system, due to any reasons whether force-majeure or otherwise, K-Electric shall have to share the same on pro-rata basis with other Distribution Companies.

However, KE desires that the power provided to it be made available on ‘base-load’/unwavering basis and power curtailment only be done during force majeure.

New subsidy mechanism: Power Division moves Nepra for approval

Another issue which is still unresolved between the Power Division and Karachi Electric is, Late Payment Surcharge (LPS) for regulatory delays.

KE argues that tariff determinations, monthly or quarterly tariff adjustments are to be made in a timely manner as per the statutory timelines (as defined in Nepra Act and rules and regulations) and in case of any delays beyond these statutory timelines, a mechanism for compensation of cost of such delays in respective tariff of K-Electric be allowed by the regulator.

Power Division, which has to pay the amount of tariff differential subsidy, through its entity CPPA-G, the market operator, has not supported the proposal.

The Power Division has requested the CCoE to approve the appended draft PPA, ICA and TDS agreement covering the existing supply (650 MW) and additional supply of 1400 MW after going through the versions of the Power Division/NTDC.

The sources maintained that decision on both issues will be taken by the ECC and subsequently by the Federal Cabinet.

Copyright Business Recorder, 2021

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