ISLAMABAD: National Electric Power Regulatory Authority (Nepra) on Wednesday calculated Rs 1.06 per unit increase in tariffs of Discos for months of October -November, 2020 under monthly fuel price adjustment mechanism, after a fierce fight between Chairman Nepra and CFO, CPPA-G on deduction of Rs 862 million for running expensive furnace oil-fired plants in October.
The increase in October 2020 has been determined at Paisa 29 against Paisa 57 per unit and for November Paisa 77 per unit against request of Paisa 96. The cumulative financial burden on consumers is estimated to be Rs 8.40 billion. The government has not passed on the notified FCA from November 2019 to June 2020, the financial impact of which was Rs 17 billion. It is not clear how the government would adjust this amount.
During a public hearing on FCAs of October-November, 2020, the Authority comprising Chairman Nepra, Tauseef. H. Farooqi, Vice Chairman Saif Ullah Chattha, Member Sindh Rafique Ahmad Shaikh and Member Balochistan, Rehmatullah Baloch raised different queries on generation mix and reasons for violation of Economic Merit Order (EMO).
The hearing was going smoothly, when Nepra's technical team stated that CPPA-G generated around 154 GWh from furnace oil and 7 GWh from HSD based plants costing Rs 1.880 billion and Rs 131 million, respectively.
The team maintained that M&E has recommended a deduction of Rs 862.53 million on account of deviation from EMO, which has been adjusted from the total cost, claimed CPPA-G.
This upset Chief Financial Officer (CFO), Rehan, who is responsible for payment to generation companies. He said that Nepra has deducted Rs 15 billion on this account so far, adding that if furnace oil plants are not to run, then shut them down.
"Nepra is deducting total cost of total generation from furnace oil and total generation from HSD, which was on decimal base. What message are we getting?. System Operator (SO) can explain it in a better way. When an amount of Rs 15 billion has been deducted on RFO so far, then RFO plants should be decommissioned," he added.
In this situation RFO-fired plants should be shut down by paying them capacity, if they are not to be run as per the load requirement of distribution Companies, he maintained.
Rehan said the reasons for operating RFO -based power plants be sought from the NPCC (system operator), as operation of RFO plants is not disallowed under the approved procedure.
After hearing the arguments of CFO, CPPA-G, Chairman Nepra stated that it is like 'the spirit is willing but the flesh is weak' and he has asked the Nepra team to first explain to the CPPA-G on what account this amount is being deducted, adding that CPPA-G has reacted contrary to what he intended.
Director Tariff, Mubashir Bhatti, clarified that Nepra has adjusted only Rs 862 million instead of entire amount of Rs 2.011 billion.
He further explained that Rs 522 million was due to less supply of furnace oil. On this issue, Monitoring and Enforcement (M &E) commented that in October 2020, the firm demand of RLNG was 650mmcfd but power sector was supplied 627mmcfd. This was the reason energy was produced from furnace oil-fired plants. He added that power plants were not provided RLNG as per their demand.
Chairman Nepra was of the view that supply of gas should be ensured as per the allocated quota for the power sector.
General Manager, NPCC, Muhammad Ayub, also supported the viewpoint of CFO, CPPA-G, saying that Nepra should allow operation of furnace oil plants to meet demand or allow load shedding.
Vice Chairman Nepra, Saif Ullah Chattha, lowered the temperature by saying that the regulator is not in favour of load shedding in the country due to fuel issues.
He maintained that loadshedding is neither in favour of domestic consumers, nor the industrial, commercial or agriculture consumers.
Chairman Nepra, who was clearly angry, stated that fuel of billions of rupees has been consumed contrary to economic merit order, and that it would have been better to spend a few million on system's improvement so that a huge financial loss was averted.
On a question, CFO-CPPA-G said that if gas companies do not supply gas to power plants as per the agreements, then they are liable to pay the capacity purchase price to the plant during the period of closure.
However, in case power plant's annual production plan is not affected, then no penalty is imposed on the gas company. However, Nepra official revealed that gas companies have already refused the claims and sent them back to CPPA-G.
The CFO CPPA-G stated that the year’s production plans were not met, and power plants have sent claims of liquidity damages to the CPPA-G.
Nepra has also directed CPPA-G to provide documentary evidence regarding penalties imposed on the gas companies for not supplying gas as per the agreements.
General Manager, NPCC, Muhammad Ayub acknowledged that transmission and distribution system has improved during the last two years under the guidance of the regulator.
On a question of Vice Chairman Nepra about deduction of Rs 682 million, CFO CPPA-G said furnace oil was consumed due to non-availability of gas, which is a system constraint, adding if the amount is not allowed it will be added to the circular debt.
Another important issue, which came under discussion at the Nepra hearing, was that CPPA-G has recovered capacity payment from consumers paid to the power plants during forced shutdown due to non-supply of fuel as per the agreement; but refunds of those damages claimed from gas companies, have not been paid to consumers.
According to a press release, the Authority conducted a hearing in respect of fuel price adjustment, for October and November. After hearing the arguments of petitioner and stakeholders, the Authority reserved the judgment. Nepra further clarified that no decision by the Authority has been made in this regard.
Copyright Business Recorder, 2020