ISLAMABAD:
The revision of agreements with Independent Power Producers (IPPs) has resulted in lifetime savings of Rs1.3 trillion, as the government works to pass on these savings to consumers, the Power Division revealed on Tuesday.
Electricity consumers have been paying Rs2.5 to 2.8 trillion annually to IPPs as capacity payments. Some of these IPPs have been receiving payments without producing a single unit of electricity due to faulty agreements made in the past.
To address this issue, the current government decided to renegotiate agreements with IPPs to reduce capacity payments. This revision has so far led to a reduction of Rs7 per unit in electricity tariffs. The government is still in the process of ensuring that this benefit reaches consumers, the Power Division said.
In a recent cabinet meeting, Power Minister Sardar Awais Ahmad Khan Leghari presented a review of the government’s policies – both undertaken and planned – to improve the efficiency of the power sector.
Key measures included the reduction in tariffs by Rs4.96 at the national level over the past eight months, renegotiation of tariffs with 14 IPPs and eight bagasse-based IPPs to secure lifetime savings of Rs1,333 billion, and policies aimed at demand stimulation.
The minister also outlined the planned power sector reforms, such as the conversion of imported coal-based power plants to Thar coal, development of an Integrated System Plan, the rationalisation of net metering, and the reduction of national circular debt.
He highlighted progress in the solarisation of tubewells in Balochistan, stating that out of 27,000 tubewells, 4,000 had already been converted, resulting in savings of approximately Rs100 million on account of losses to the power sector in the province.
The minister also detailed the steps taken by the government to reduce inefficiencies in Distribution Companies (DISCOs) and explained that the policies had been implemented to improve the sector’s governance by enhancing transmission and distribution efficiency.
Under a revised deal, it was learnt that 14 IPPs had agreed to the new terms and conditions of agreements, including return of excess profits to the tune of Rs31 billion – compared with the initial claims of Rs55 billion and waived claims for late payment interest (LPI) on outstanding amounts.
On the other hand, the government agreed to close ongoing investigations by the National Accountability Bureau (NAB) and the National Electric Power Regulatory Authority (Nepra) against certain IPPs.
The prospective buyers of the UPL and the UPL-II had agreed to waive their claim of the LPI receivables worth Rs62.5 billion on the condition that government would facilitate in waiver of the LPI claim by the Oil and Gas Development Company Limited (OGDCL) from UPL and UPL-II, amounting to Rs46 billion.
Similarly, five IPPs on the Sui Northern Gas Pipeline Limited (SNGPL) network had also waived their LPI receivables amounting to Rs 4.6 billion on the condition that the government would facilitate in waiver of the LPI claims of SNGPL that amounted to Rs1.9 billion towards the IPPs.
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