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ISLAMABAD: The government is all set to revoke No Objection Certificates (NOCs) issued to Captive Power Plants (CPPs) selling electricity to national grid, besides rationalizing tariff of CPPs to encourage them to switchover to power grid, well informed sources told Business Recorder.

Based on the discussion in the meeting held on March 27, 2008 on the issue of “urgent measures for additional power generation” following direction was conveyed to Petroleum Division: “the condition of self-use in respect of gas allocation reserved for captive power has been revoked and the CPPs who had surplus generation to supply to the Discos or KESC, SSGCL and SNGPL will issue NOCs to the respective CPPs.”.

This decision was conveyed to both SSGCL and SNGPL for implementation. Pursuant to the decision CPPs who had surplus power generation sought generation licence from NEPRA for selling excess generation to Discos. As of July, 2022 both SNGPL and SSGCL have reported certain CPPs who hold NOC/ permission for sale of surplus power to Discos.

According to sources, there are a total of 28 consumers on the systems of SNGPL and SSGCL, of which six consumers are inactive (SNGPL 1, SSGCL, 5) whereas 22 consumers are active. Contractual load of active consumers is 78.8 MMCFD of which 6.8 MMCFD and 72 MMCFD on SNGPL and SSGCL systems, respectively. The current gas load on SNGPL system is 1.2104 MMCFD and 31 MMCFD on SSGCL system. Applicable tariff on SNGPL system is $9 mmbtu RLNG/ system (blend), SSGCL (exports Rs819 per mmbtu, others Rs1054 per mmbtu).

The sources said, out of 18 consumers of SSGCL, eight are captive (export) whereas 10 units are captive (no-export). Only one consumer is consuming RLNG over and above its indigenous gas load.

Captive power: enough blackmail!

Section 3.1.6 of the Natural Gas Allocation and Management Policy, 2005 provides the following for gas supply to Captive Power sector: 3.1.6 gas supply to all consumers in captive power sector will be made after first meeting the requirement of domestic, fertilizer, commercial, industrial and power both WAPDA/ KESC and IPPs) sectors on the following basis: (i) those dual fired power plants with a capacity of up to 50 MW, which employ combined cycle or cogeneration technology, shall be encouraged for allocation of gas. In order to ensure the optimal gas use for power generation, industrial units collectively seeking merchant power plants for self-consumption only will also be included in this category; and (ii) gas supply for self-power generation would be on “as and when available basis” at different locations.

On November 26, 2020, the Federal Cabinet while ratifying the decision of the CCOE meeting directed that no new gas connection may be allowed to industrial units solely for power generation through domestic gas or LNG where grid connectivity is available.

The sources said government in the past has been taking measures for efficiency audit of the captive power plants on SSGCL and SNGPL network but it could not be proceeded because of unwillingness of the industry and protracted litigations.

Petroleum Division is of the considered view that the only way to discourage use of gas/ RLNG for self-use by CPPs is to rationalize the tariff structure so that CPPs can get the electricity from grid and the gas so relieved can be used for other economic activities.

Considering the shortfall in the demand and supply of natural gas in the county and the availability of surplus power in the national grid, Petroleum Division submitted following proposals for consideration: (i) the earlier directive of March 27, 2008 asking SSCCL and SNCPL to issue NOC to CPPs for sale of surplus power to Discos may be revoked. Moving forward both Sui companies would not issue such NOC to CPPs;(ii) new CPPs with cogeneration technology, having no access to power grid may be allowed to get RLNG connection at notified tariff;(iii) load enhancement of existing CPPS with cogeneration technology may only be allowed on RLNG; and (iv) tariff for existing CPPS on indigenous gas supply would be rationalized to discourage use of gas for self-power generation and to encourage switchover to power grid.

Meanwhile, Rehan Jawed, Sind Paper Mills Forum, in a letter to Chairman Special Task Force on Energy, Shahid Khaqan Abbasi has proposed that RLNG-fired power plants including KE, be run on indigenous gas to reduce impact of FCA on industry as CPPs on indigenous gas are generating electricity at Rs 13/ unit whereas rest of Karachi is being billed at Rs 42 per unit (August 2022) because of usage of furnace oil and imported RLNG by KE.

Copyright Business Recorder, 2022

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