ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) raised concerns on Thursday regarding negotiations with Independent Power Producers (IPPs). These discussions could negatively impact investment in Pakistan. Nepra members expressed their worries during a public hearing on the provisional Fuel Charges Adjustment (FCA) for K-Electric for September 2024. K-Electric has requested a negative adjustment of 16 paisa per unit, aiming to refund Rs 247 million to consumers, plus General Sales Tax.
During the hearing, several participants commended Nepra Member (Tariff and Finance) Mathar Niaz Rana for his dissenting note on K-Electric’s generation tariff. The hearing also highlighted the recent termination of contracts for five IPPs and ongoing negotiations with other power plants. These negotiations are led by the Energy Task Force, which includes Minister for Power Sardar Awais Khan Leghari and Special Assistant to the Prime Minister on Energy Muhammad Ali. Experts from Nepra, CPPA-G, SECP, and PPIB are also involved.
Concerns Over Policy and Treatment of Investors
When the termination of IPP contracts was discussed, Nepra Members Amina Ahmed (Law) and Rafique Ahmad Shaikh (Technical) openly shared their views. Ahmed stated, “There is no policy on the government side. What is happening regarding IPP contracts, as reported in the media, is not an actual policy. It’s unfortunate that such things are happening.”
Shaikh, visibly frustrated by comments from Jamaat-e-Islami representative Imran Shahid, echoed her sentiments. He questioned if the intention was to drive investors out of the power sector. Shahid accused Nepra members of colluding with K-Electric for financial gains at the expense of consumers, claiming K-Electric merely rubber-stamps requests. Shaikh and Ahmed expressed their annoyance over Shahid’s language and suggested that only representatives from the business community should be allowed to speak in future hearings.
Questions Regarding K-Electric’s FCA Adjustment
Shaikh directed Nepra’s team to document questions raised by Arif Bilwani for detailed responses from K-Electric’s management. Bilwani argued that the 16 paisa relief in the FCA was due to electricity supplied from the national grid, pointing out that K-Electric’s own generation was expensive in September 2024. He also raised concerns about the pressures of LNG on two plants, one of which utilizes a compressor. K-Electric management addressed these inquiries, explaining the compressor’s installation.
Criticism from the Business Community
Tanveer Barry, a representative of the Karachi Chamber of Commerce and Industry, criticized the FCA for being unfair to Karachi consumers. He noted that while the FCA adjustment for Discos was 71 paisa per unit for September 2024, K-Electric consumers would only receive relief of 16 paisa per unit. Barry urged K-Electric to incorporate renewable energy into its generation mix to lower tariffs and promote industrial growth.
K-Electric’s Financial Overview
Ayaz Jaffer, Director Finance at K-Electric, responded to the criticisms by stating that K-Electric’s FCA rates have been lower than those of Discos for the past two to three years. He attributed higher fuel costs to the lack of availability of local gas for power plants. Jaffer suggested that if local gas were available, K-Electric’s fuel cost could drop to Rs 8-10 per unit. He added that K-Electric’s overall output was 6 percent lower in September 2024 compared to the same month in 2023. The industrial sector saw a significant 12-13 percent decline, while the domestic segment faced a 3 percent decline, largely due to the country’s economic conditions. However, a winter package is expected to boost economic activity and power demand.
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