Ministry seeks proposals from power producers

The Ministry of Energy has sought proposals from the power producers how to reduce and bring some relief in the cost of electricity being paid by end consumers, including industrial, commercial and domestic consumers, and how to resolve the quantum of capacity payments that are significantly increasing in the future.

Sources in the power sector said that in the first meeting with IPPs by the Minister for Energy Omar Ayub Khan along with other government officials stated that a number of areas would be evaluated, including heat rate, efficiency, US$ indexation, debt restructuring, etc and approach proposed would be to mutually discuss with IPPs in a conducive environment to review the tariff structure and see where relief could be brought.

The meeting was also attended by Special Assistant to the Prime Minister on Coordination of Marketing and Development of Mineral Resources, secretary Finance Division, secretary Power Division and secretary Law and Justice Division (Committee).

The IPPs were informed that a technical committee would develop the TORs for the working and sequential approach how to take this exercise forward.

The Technical Committee would also share a matrix with IPPs for seeking information from IPPs for the requisite assessment of the committee.

The committee would comprise technical experts including Shahzad Qasim (SAPM), Shah Jahan Mirza (MD PPIB), Naveed Kamran Baloch secretary Finance, Anwar Sheikh, Zafar Iqbal and Abid Lodhi, which would consult with IPPs.

Also, recommendation from the IPPs would be sought on proposed areas of tariff reduction.

On the other hand, the IPPs first raised their concerns over inquiry report and the way it was in the media and argued that, while the committee is seeking recommendations to reduce tariff and upcoming capacity payments, it should also seek to resolve general and specific issues of the IPPs including liquidity crisis, overdue, non-payment of late payment charges, gas supply, gas pricing, etc.

They added that it is also important to keep the core objective in focus, while undertaking such exercise and if the area that the committee would be looking to review impact of tariff on the consumer, then the exercise may be futile at the cost of re-negotiating the tariff and the efforts should be focused on areas, where it would make a material impact on the tariff, e.g. T&D losses account for 20 percent, while taxes account for another 20 percent - therefore, the effort should be focused on such low hanging fruit that would have a much greater impact on achieving the above mentioned objectives.

The federal minister clarified that his committee, and the meeting currently being held to explore the above mentioned objective had no relation to the recent Report of the Commission headed by Muhammad Ali, and the timing of the release of report is just a coincidence and refused to comment on it.

However, it was unfortunate that the IPPs have not been consulted in preparation of the report.

The IPPs argument was that the largest portion of the capacity payments comprises the debt servicing component; for those IPPs who have repaid their project loans, the CPP payment is not so significant so as to cause an impact on the overall tariff.

The IPPs have also emphasised the excellent relations they enjoyed with the Ministry of Energy and other Power Sector stakeholders, such as secretary Power, PPIB, CPPA(G), etc and the regulator the NEPRA; and the cordial environment in which discussions with the Power Division that had led to agreement on terms of a settlement agreement on the payments dispute of nine IPPs.