Independent Power Producers: Nepra refuses to accept provisional price of RLNG

National Electric Power Regulatory Authority (Nepra) has reportedly refused to accept provisional price of Re-gasified Liquefied Natural Gas (RLNG) for Independent Power Producers (IPPs) fearing that any such approval can become a headache for the regulator, well informed sources told Business Recorder. An inter-ministerial meeting duly represented by the Ministries of Water and Power, Ministry of Petroleum and Natural Resources and IPPs had agreed on a provisional price of $12.80 per MMBTU for RLNG-fired power plants because of incomplete house of OGRA - the only authority which is empowered to approve price for gas and petroleum products.
According to sources, Ministry of Water and Power, wrote a letter to NEPRA and requested a provisional price of RLNG part of IPPs tariff but the regulator turned down the request, saying that RLNG price cannot be made part of tariff until OGRA approves it.
Nepra's refusal, sources said, has placed the Ministry of Water and Power in an odd position. IPPs are ready to open back to back Standby Letters of Credit (SBLC) besides accepting provisional price of RLNG, but now Nepra has created an obstacle. Ogra argues that LNG DES price, "take or pay volumes, losses on account of net sale proceeds", was not included under this head earlier approved by the ECC. The same has now been added without mentioning its basis.
Ogra has also raised objections over four per cent margin for Pakistan State Oil (PSO) on import of LNG, arguing that consumers should not be unnecessarily burdened. The sources said, the issue of provisional agreement can be resolved amicably as IPPs have signed provisional agreement on the proposed price of RLNG. However, agreement between IPPs and Central Power Purchasing Agency (CPPA) and Sui Northern Gas Limited (SNGPL) cannot be implemented until boards of both gas utilities approve it.
"There will be no impact on IPPs if they pay higher price of RLNG and later on OGRA reduces it because IPPs will get back overpaid amount," the sources continued. Ogra further maintains that only rational, prudent and unavoidable costs should form part of RLNG prices so that unnecessary burden should not be passed on to the end consumers and price is kept within reasonable limits in comparison to the alternate fuel, so as to remain viable to produce cheaper electricity.
The regulator further stated that SNGPL/SSGCL administrative margin of $0.05 per cent MMBTU for each company is to be treated as operating income and be fixed on rational basis in rupee terms which on the present conversion works out to be Rs 5.09 per MMBTU.