ISLAMABAD: National Electric Power Regulatory Authority (NEPRA) has turned down a review petition of Pak Matiari Lahore Transmission Company (Pvt.) Ltd. (PMLTC) in which the latter had sought billions of rupees’ extra costs which were not allowed in the decision of September 2, 2021.
PMLTC, which has laid flagship project of $ 1.7 billion under CPEC ±660 kV HVDC, submitted that despite the clear reference to the COVID-19 pandemic as one of the causes for the extension of the Recorded Commercial Operation Date (RCOD), the Authority ignored the fact that the relevant parties reached an agreement in the ISA Addendum Agreement and the IA Addendum Agreement on the basis of Covid- 19 for which the Company is entitled to claim an extension of RCOD in view of the Force Majeure Events under the Transmission Service Agreement (TSA).
The 878-kilometer 4000 MW project is being executed by Pak-Matiari Lahore Transmission Company (Pvt) Limited, on Built- Own- Operate- Transfer (BOOT) basis for a term of 25 years. Chinese ambassador also wrote a letter to Chairman, NEPRA, Tauseef H. Farooqi, and sought his help to sort out grievances of Chinese company.
PMLTC submitted that due to COVlD-19 and unavailability of energy to test and commission the project both parties agreed to extend the RCOD for six months from March 01, 2021 till September 01, 2021.
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Accordingly, a Memorandum of Understanding (MoU) was signed on February 18, 2021 which was sanctioned by the Economic Coordination Committee (ECC) of the Cabinet. PMLTC stated that the Authority’s observation that the delay in achieving RCOD is due to failure of low power test which resulted into frequency oscillation of line and the inability of the parties to perform their contractual obligations in a timely manner is factually incorrect.
The company, in its review petition, submitted that the decision of the Authority is contradictory with its past determinations. The Authority, based on its own precedents, acknowledges that it is not the appropriate forum to determine the basis of a change in construction period (i.e., extension in RCOD) as the same is a contractual matter and therefore to be dealt in accordance with the terms of the contractual arrangement of the parties involved.
PMLTC further submitted that such precedents bind the Authority to follow its past practice and extend the same treatment to the Company as it had in the past given to other parties that had approached the Authority for endorsement of RCOD extension. The Authority’s conduct contravenes the established principles of fairness, and the same encroaches upon the legitimate expectation of the Company to be similarly treated by the Authority as it has treated others in the past.
PMLTC during the hearing stated that the delay has been admitted by the Authority in its State of Industry Report 2021 (SIR). Private Power and Infrastructure Board (PPIB) submitted that after the approval of the ECC, NEPRA may allow extension in RCOD. However, such extension in RCOD should not result in eligibility of the Company to capitalize Interest During Construction (IDC), and Return on Equity During Construction (ROEDC) for such extended period, and Tariff of the Company for 25 years post-COD should remain intact.
The Authority noted that the data obtained from NTDC at the time of tariff modification decision of September 02, 2021 regarding generation plants that were to be evacuated from this line showed that by March 2020, three projects having cumulative capacity of 3300MW that includes 1320MW Port Qasim, 660MW Engro Thar I & II and 1320MW China Hub Power Generation Company Limited were already commissioned. Further, NTDC also noted that the energy from 1100MW K2 power project was also envisaged for the transmission from this line.
The Authority further noted that in the review motion, PMLTC submitted that the high-power test which took place on August 2, 2021 based on which Maximum Demonstrated Capability of 3,000MW was certified by the Independent Engineer on August 19, 2021 and subsequently COD of the line was declared on the basis of same test that shows that the testing of the line on high power was possible with 3,300 MW of the available capacity from the above referred committed projects.
Further, the Authority is also cognizant of the fact that the provision of energy was the responsibility of NTDC and the commissioning of the line was of PMLTC under the TSA, if the respective obligations were not fulfilled by the parties to the contract, the onus of the same could not be passed on to the end consumer. However, in the instant case both the parties mutually agreed to amend the TSA incorporating the extension in RCOD which shows that the contractual obligations by both the parties were not fulfilled.
The Authority observed that as per TSA the testing of the transmission line was required to be conducted for completion of the project whereas in the minutes of the meeting dated November 30, 2020 both the parties, NTDC and PMLTC, acknowledged that there was a defect in the transmission line which emerged during low power testing. Further, the certificate of readiness issued by PMLTC’s Engineer M/s. CESI, on December 01, 2020, was declared null and void upon the failure of the low power test due to frequency oscillation on December 02, 2020, and notice of dispute in the matter was served to the Company by NTDC.
The matter was resolved between the parties through Memorandum of Understanding (MOU) dated February 18, 2021 without a declaration of the Force Majeure Events and both parties have agreed to extend the COD till September 01, 2021. Both parties also agreed that the TSC for the extended period shall be paid for the maximum demonstrated capability as a result of the low and high-power tests.
This also establishes that the construction of the transmission line was completed and no delay was incurred due to the Covid-19 pandemic but the line could not achieve COD as a result of failure of low power test.
NTDC, in its letter of November 04, 2021, submitted that the tariff determined by NEPRA for the said project is already reasonable and justified and is in line with all the legitimate incremental costs incurred by the Company.
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The Authority again clarified that PMLTC has not submitted any new ground, documents in support of its claim or pointed out any error or mistake in the impugned decision, which requires review of modification decision dated September 02, 2021 in pursuance to NEPRA (Review Procedure) Regulations, 2009.
The Authority considered that the revenue loss due to the difference in total capacity (4000 MW) and maximum demonstrated capability based on low (800 MW) and high-power test (2200 MW) or any other additional cost that has been incurred due to delayed COD was neither agreed in MOU nor supported by relevant agencies, i.e., NTDC, PPIB, MOE and same was also not considered prudent by NEPRA; therefore, the request was declined.
The Authority also believes that there is no revenue shortfall since the tariff is applicable for 25 years starting from September 01, 2021 which is intact. During the hearing, PPIB and NTDC did not support the request of recovery of a revenue shortfall. Further PMLTC was unable to provide further justification in this regard. In view of the foregoing, the Authority has decided to maintain its earlier decision regarding revenue shortfall.
The claim of the petitioner that the Authority has omitted a high-power test carried on August 02, 2021 wherein Maximum Demonstrated Capability of 3,000MW was certified by the Independent Engineer is incorrect.
No such information regarding carrying out of high-power test at 3,000MW was shared by PMLTC as part of the proceedings for modification petition dated April 02, 2021 and was not claimed in the earlier tariff modification petition instead the same has been claimed now in the subject review motion. One of the officials of NTDC said that the decision of NEPRA was illogical as Rs 42 billion of the national exchequer has been saved by delaying the COD.
Copyright Business Recorder, 2022
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