ISLAMABAD: In an effort to lower the electricity tariff, the National Electric Power Regulatory Authority (Nepra) has reduced the Return on Equity (ROE) and Return on Equity During Construction (ROEDC) components of 12 thermal power plants.
“Nepra has reduced the ROE and ROEDC components of those 12 thermal power plants that were built under the Power Generation Policy 2002 and have a total net capacity of 2,412 MW,” a Nepra spokesman said in a statement released on Friday.
“Over the remaining life of the schemes, the tariff cut will result in an expected saving of Rs182 billion,” the spokesperson said.
The decision was taken in response to the Central Power Generation Agency’s (CPPA-G) tariff adjustment applications for lowering the ROE and ROEDC components of the 12 plants.
The CPPA-G had asked Nepra to update the ROE and ROEDC components for local equity on the basis of a 17 percent return and a fixed exchange rate of Rs148/US$ without dollar indexation, and for international equity on the basis of a 12 percent return with dollar indexation.
According to the current rules and regulations, the authority accepted the applications and held a hearing on March 3, 2021, at which it deliberated on the applications.
Later, Nepra revised the ROE and ROEDC components for local equity based on a 17 percent return and a fixed exchange rate of Rs148/US$ without future indexation, and the ROE and ROEDC components for international equity based on a 12 percent return with future dollar indexation.
Nepra had previously cut the ROE portion of three 931MW nuclear power plants, including C-2, C-3, and C-4, and slashed the tariff by Re. 0.2515 per unit in a landmark decision. This decision was made to help save Rs2.05 billion every year for the next 25-37 years.
Nuclear power plants filed petitions with Nepra on August 2, 2020, in accordance with a Cabinet Committee on Energy (CCOE) decision of August 2, 2020, requesting a reduction in their ROE components due to the decreased ROE rate and the freezing of the exchange rate at Rs148/dollar.
After a public hearing, Nepra agreed to hold the exchange rate at Rs.148/dollar and lower the return on investment from 15% to 14.5 percent for the remaining life of the schemes. Nepra was told last month that 30 of the 47 independent power plants (IPPs) had signed agreements.
