Electricity consumers to pay Rs5 per unit more: ECC

 

ISLAMABAD: The Nawaz government has taken a decision under which consumers will now pay for debt servicing of the loans of inefficient Gencos and Discos that are already exposed to huge line losses, resulting in a huge increase in tariff of up to Rs5 per unit.
The startling decision has been taken in the ECC (Economic Coordination Committee) meeting held here on Wednesday with Finance Minister Senator Ishaq Dar in the chair while approving the summary of the Ministry of Water & Power.

The summary was to issue policy guidelines to Nepra (National Electric Power Regulatory Authority) to incorporate debt servicing on actual basis in revenue requirements of distribution companies, which would be adjusted in tariff of Discos on an annual basis.

The ECC also approved the summary of the Ministry of Water & Power for issuance of policy guidelines to Nepra to rationalise the T&D loss target of 12.82 percent to 15.75 percent on the same analogy as was done for tariff for the financial year 2012-13.

The Discos claim that the T&D losses remained at 17.55% for the year 2013-14. The minister for water and power informed the ECC that the government in the last one year had improved in recovery and containing the line losses up to the extent of 2% and will continue to make progress in this regard.

The decision, the official in the Ministry of Water and Power said, factually negates the Sector 31 of Nepra Act and verdict of the Supreme Court which appeared in December 2013 in which it was clearly said that no policy guideline could be issued to the regulator which directly affected the consumers who paid the electricity bills regularly. The apex court had said that losses and inefficiencies should not be passed on to consumers.

However, DG Media, Ministry of Finance, Nadeem Kiani said that it would have a zero impact on the tariff of consumers, but sources in the Ministry of Water and Power argued that the government had cleverly played by approving the policy guidelines under which debt servicing had been included in the tariff of Discos.

The sources said that Nepra, while toeing the directives of the Supreme Court, has factually reduced the line losses of Discos, which are now permissible in the tariff owing to which consumers will be having a benefit of Rs30-35 billion a year. The government has included the debt servicing component in the tariff to bridge the loss the power sector will be sustaining because of the reduction of permissible losses in the tariff by Nepra.

Nepra has reduced the permissible losses from 16.5 percent to 12.82 percent. The Nepra spokesmen, Safeer, said that in the past Nepra had disallowed the inclusion of mark-up in the tariff and if the government gives its new policy guidelines, including debt servicing component in the tariff of Discos, the authority will assess as to whether the policies are prudent and if they are found not prudent, then Nepra will reject the said policies.

To a question about the impact of the ECC decision on tariff, he said that he was right now not in a position to work out the impact on the tariff as it was the job of tariff department of the regulator.

The sources said that with the reduction in permissible losses, the tariff will be reduced by Rs3 per unit, but with inclusion of debt servicing component in the tariff of Discos under the approved policy guidelines by the ECC, the tariff will surge by up to Rs5 per unit and the government will give subsidy for Rs2 per unit and pass on Rs3 per unit to consumers to bridge the loss to be incurred on account of reduction in permissible losses.

The ECC also approved allocation of gas from Sara and Suri gas fields, located in district Ghotki, Sindh, to Genco-II at mutually agreed terms and conditions. It may be mentioned here that the gas fields remain dormant due to lack of investment.

The meeting also approved the summary of the Revenue Division for exemption from income tax to profits and gains derived by coal mining projects in Sindh supplying coal to power generation projects only.

ECC allows RPPs to operate under new name

 

ISLAMABAD: The Nawaz Sharif government has approved the revival of the Rental Power Plants under the new name of Short-Term Independent Power Plants (STIPPs).
The Economic Coordination Committee, which met here on Thursday with Finance Minister Senator Ishaq Dar in the chair, has accorded approval to the new policy under the subject of “Utilisation of the existing available generation capacity - short-term IPPs”.The News on March 22 broke the news that the government had decided to revive the Rental Power Plants (RPPs) under a new name to beat the power crisis.

The ECC has now approved the summary of the Ministry of Water and Power for utilisation of the existing available generation capacity from short-term IPPs subject to the fact that it is not in violation of the Supreme Court’s judgment announced on March 30, 2012.

It is pertinent to mention that the power generation equipment imported under another scheme was declared illegal by the Supreme Court of Pakistan in its judgment. In order to avoid obsolescence of such plants and machinery and to avoid monetary claims under arbitration, these plants and machinery can be utilised to add 200MW of electricity.

Those RPPs which will get clearance from the NAB will become short-term IPPs and then they will get tariff and generation licence from Nepra to generate electricity.

The more interesting disclosure is that the Ministry of Water and Power had worked out 400MW electricity to be generated, but now it has been decided that the government will get only 200MW of electricity from the STIPPs.

One of the top officials of the Ministry of Water and Power said the government wanted to oblige those RPPs which are their favourite ones and for this the ministry wants to clear the three RPPs that include the Gulf Power Limited (70MW), Reshma Power Limited (90MW) and Techno Power Limited (100MW) for short-term minister of water and power has approved this proposal. He said if it happens then there would be no level playing field for other RPPs, which can also be converted into STIPPs.

However, under the ECC decision, the project company will obtain generation licence and tariff determination from Nepra, which will also determine the terms and conditions of tariff. The tariff will be determined on take-and-pay basis and electricity actually delivered to the national grid.

The short-term IPPs may have an option to sell electricity to the bulk consumers like housing societies, industrial parks, etc. without the government guarantees and obligation of the public entities to buy all of the generated electricity. As per the summary the term of the Power Purchase Agreement (PPA) will be of 3 year and the draft of PPA will be prepared by NTDCL for short-term IPPs for approval of the ECC. The project company will have to obtain ‘no objection’ certificate from NAB for utilisation of plant and machinery.

Unconditionally and irrecoverable waiver of claims of arbitration against the government and its entities shall be eligible under the short-term IPPs framework.

The ECC also approved export of 250,000 metric tons of sugar by sugar mills from the surplus sugar stock with conditions that export quota will be allocated on first-come-first-served basis; export may be made against irrecoverable letter of credit or a contract with 25% non-refundable advance payment and that shipment may be made within 45 days of the registration of contract with the SBP, and the non-refundable advance payment to be forfeited in favour of the government of Pakistan in case of non-performance.

The official said that the country has surplus sugar which the industry wants to export to ensure payments to the sugarcane growers.

In the meeting, the finance minister also directed ministry of industries and production to ensure outstanding payments to sugarcane growers by sugar mills in coordination with the provinces.

The ECC approved the summary of the Finance Division for import of 0.125 million tons of urea fertiliser for the incoming Kharif (April to September season) 2014 in order to meet the demand as recommended by the ministry of national food security.

This import will not impact the foreign exchange reserves, as it will be done through ITFC. The finance minister on the occasion said that the earlier decision of the ECC to maintain the retail price of Rs1786 per bag must be ensured in the local market.

He said the ministries of food security and industries & production should work in coordination with the provinces for the agreed price. The ECC also constituted a four-member committee comprising ministers for water and power, petroleum and natural resources, food security and industries and production to sort out the issue of supply of required gas to the local urea manufacturers.

The ECC approved the summary of the Aviation Division for release of an amount equivalent to US $29.9 million to PIAC for acquisition of aircraft on dry lease. PIA intends to lease eight A320S offered by Qatar Aviation Lease Company through international tender. These aircraft will be available from April 2014. The minister cautioned the management of PIA that it cannot go outside the tender and should ensure that all the requirements are met and relevant rules must be followed.

The ECC also considered the summary of the ministry of commerce regarding lifting of ban on the import of gold. The ECC directed the Commerce Ministry to resubmit the summary, incorporating the guidelines provided by ECC, in the third week of April for consideration.