CPL Ordinance: Govt misses legislation adoption target: IMF

ISLAMABAD: Federal government has missed the target of adopting legislation to make captive power levy (CPL) Ordinance permanent by the end of May, according to the IMF.

The shifting of CPPs to the electricity grid to boost grid demand while preserving scarce gas resources to more efficient gas-based power generators remains a reform priority for the sector. The cutoff of CPPs from gas supplies did not happen at end-January 2025 as planned, partly because approximately a quarter of CPPs were not operationally ready to move to the grid.

As an alternative, the authorities decided to use the price mechanism to incentivize the shift to the grid. Specifically, a CPL was introduced on February 1, 2025, which set the price of all gas for CPPs equivalent to the industrial grid plus a 5 percent levy; the levy will increase by an additional 5 percent every six months until it reaches 20 percent in August 2026.

Levy proceeds — the difference between the actual price (levy included) and the OGRA-determined CPP gas price — will be transferred to the electricity grid to reduce the average effective grid tariff (evenly across the existing tariff structure). In support this effort, the authorities have made progress in facilitating service-level agreements between Discos and CPPs, and this should continue as quickly as possible so that CPPs can reliably use the grid.

The government stated that it did not immediately end captive power usage by end-January 2025 as large take-or-pay RLNG import contracts would have led to significant adverse impacts on gas CD.

The government has finalised and shared with all CPPs a service level agreement which sets a performance standard, as prescribed by the NEPRA, of uninterrupted electricity supply for CPPs that connect to the grid, including penalties for Discos that are not able to meet this standard.

Copyright Business Recorder, 2025