Ministry pushes CPPA-G to penalize IPPs

The Ministry of Water and Power has reportedly pushed Central Power Purchasing Agency-Guaranteed Limited (CPPA-G) to penalize the Independent Power Producers (IPPs) and dispute the invoices which have already been cleared by the power purchaser, sources close to Minister for Water and Power told Business Recorder.
CPPA-G, an organisation which has been challenged by the regulator on several occasions for allegedly not fulfilling its commitments, has issued a Dispute Notice to the IPPs, on the "directives" of the administrative Ministry. Earlier, Private Power & Infrastructure Board (PPIB) which is reportedly being referred to as "Private Power & Destruction Board (PPDB)", issued a legal notice to IPPs for publishing advertisements in the newspapers meant to allegedly defame the government.
The sources said it is mandatory for the diesel oil-fired power plants like Saif, Orient and Saphire etc to maintain stock of 15 days whereas those which run on furnace oil are to maintain stock of 30 days. The Chief Executive Officer (CEO), CPPA-G has written a letter to some of the IPPs, duly approved by the Ministry's top brass, states that the Public Accounts Committee during its meeting to examine special audit report on the settlement of the circular debt of Rs 480 billion paid/ adjusted during 2013, observed that the IPPs were benefiting from undue enrichment as a result of payments being made by the power purchaser CPPA-G (former NTDC) without due consideration to the applicable heat rate. The PAC further directed to conduct the heat test of all thermal IPPs in order to establish the fair and equitable return to the invoices. In the absence of such tests, some of the IPPs are earning over and above the guaranteed IRR which is liable to be adjusted against invoices claimed.
"By way of background, CPPA has stated that as per Power Policy 2002, the security package documents and incentives given by the Government of Pakistan, certain Rate of Return (IRR) was guaranteed to the IPPs/ investors on the premise that they would be fulfilling their rights, obligations and duties under the security package documents," said the CEO CPPA-G
Interestingly, the IPPs to which this Dispute Notice was served do not fall under Power Policy 2002 instead they fall under Power Policy 1994. CPPA-G did not bother to take into account this very important policy matter. CPPA claims that the tariff determined by Nepra for the project (IPP) also included a component as "working capital cost for maintenance of 15 days fuel stock at full load operations at all times. Currently, you IPP have defaulted on maintaining the requisite quantity of fuel stock," thereby utilising the said component (fuel stock) elsewhere.
CPPA-G further argued that "the IPPs have been raising their monthly invoices and demanding full tariff (while defaulting on the maintenance of fuel stock of fifteen days) resulting in unjust enrichment of the IPPs by receiving excess payments/amounts on account of working capital required for the fuel stock whereas the IPPs were and are still under default of this mandatory obligation of the PPA. As a result of this, the IPPs have received payment which were not legal and contractually due and payable to them and as consequence a wrongful call upon the GoP guarantee has been made due to payment delay by the power producers.
" We dispute all the invoices raised by some of the IPPs on the ground that you (IPP) were in default of your obligations under the PPA and in non-compliance with the directions of the PAC, accordingly not eligible for the cost of working capital claimed and adjustment on account of heat rate savings," said the CEO CCPA-G. However, power sector experts argue that whatever claims are being disputed by the CPPA-A, the latter has already issued letters of claims' acceptance, which implies that CPPA-G is receiving instructions from somewhere else.
"Each IPP has letters which state that CPPA-G has cleared their so and so claims and has sent for payment. How can a claim be disputed after its clearance from the concerned organisation? Secondly, in case of any disputed payment of claim, it can be said that extra amount has been paid previously which will be adjusted in future but you can stop payment of future claims," said one of the power sector analysts. CCPA-G has adopted a useless way to send Dispute Notice instead of opting for the legal way; the government has gone for arm twisting of the IPPs. This approach will hurt long term investment in the country, he continued.