ISLAMABAD - AHMAD AHMADANI - Ministry of water and power has now declined to approve a ‘controversial’ policy pertaining New Captive Power Plants (NCPPs) which it approved earlier, while power distribution companies (Discos) inked 20 years long agreements with these power plants.
After Rental Power Plants (RPPs), New Captive Power Plants (NCPPs) multi billion rupees worth scandal unearthed under which power distribution companies (Discos) to pay Rs1.83/unit fine for not purchasing power from these plants while if supply would be suspended from NCPPs, influential textile millers (owners of NCPPs) would enjoy immunity through new policy and would not pay a single penny in future. And, if gas is not provided to these gas-run NCPPs plants then Discos would pay a fine worth Rs1.69/unit, which in result would be paid by poor consumers. Even, no approval on policy pertaining NCPPs was sought from the economic coordination committee (ECC) of the cabinet.
Making violation of necessary rules and regulations, the Ministry of Water & Power, All Pakistan Textile Mills Association (APTMA), Water and Power Development Authority (WAPDA), and Pakistan Electric Power Company (Pvt) Ltd (PEPCO) hands in glove with each other had mutually fixed the tariff of New Captive Power Plants (NCPPs) in 2009 for new policy regarding NCPPs when incumbent Prime Minister Raja Pervez Ashraf was the Minister for Water & Power. And, Wapda’s Member Power played a role in setting the tariff rate. While no consultation was taken with National Electric Power Regulatory Authority (NEPRA) and even no approval was sought from the regulatory authority on this policy. Upon this, Nepra has declined to approve the tariff of NCPPs earlier set by the water and power ministry by saying that power ministry and PEPCO has committed violation of NEPRA Act. However, the power ministry now led by Chaudry Ahmad Mukhtar has also refused to submit its nod on the policy under which industrial sector was benefited.
Documents made available with TheNation have disclosed that incumbent power ministry under minister Chaudry Ahmad Mukhtar while categorically refusing to approve a policy on NCPPs has said that the criterion for fuel cost component should be based upon brand new machinery; ‘It is not justifiable to recover the cost on a new machine in only seven years. “It has to be prolonged period of 20 plus years and in case of new plants at least 20 per cent equity be kept intact. The cost of the plant should however come through transparent competitive bidding,” documents read.
Regarding absence of Penalty clauses in the PPA if the power producer declines to deliver the energy after expiry of seven years, the Ministry commented as “the consumers’ rights can be protected through an appropriate clause in the PPA to be suggested by legal experts.” Operation and Maintenance (O&M) cost has to be substantiated through the actual audited costs of the plant instead of fixing the cost without any basis; and utilisation of gas allocation may not be wasted on single cycle, low efficiency plants.
“It is advisable to use this pipeline quality gas allocation in more efficient, bigger plants like Orient, Sapphire or Hallmore. The cost of generation in these plants shall be lower than the proposed smaller plants,” said documents.
The ‘controversial’ policy pertaining NCPPs was approved by the Board of Directors (BoD) of Pakistan Electric Power Company (Private) Limited (Pepco) and endorsed by Ministry Water & Power vide its letter No. PA/JS (P)/2009-Misc dated 14-7-2009.
Under this policy, new thermal power plants with brand new machinery were planned to be set up with new investment in the jurisdiction of ex-Wapda distribution companies (Discos). The salient features of the policy are as under:
• The power plants will be established with new investment on new machines or engines running on pipeline quality gas, biogas or bagasse.
• Power plants will be established on built, own and operate basis by industrial sector anywhere in Pakistan within the jurisdiction of the Discos.
• The NCPPs while fulfilling their own power requirements, would be offering at least
10MW and maximum of 49MW to Discos out of the total capacity installed at single location under the umbrella of captive power plants.
• The sale and purchase of power will be through bilateral agreement between power purchaser and the power producer.
• By virtue of the specified allocation of power for Discos, NCPPs will be entitled for financial cost through negotiations.
• Financial cost will be recovered by NCPPs through kWh delivered to Discos during the 1 Phase of the agreement (7 years) on the pattern of front loaded tariff.
• The term of the agreement will be 20 years, 7 years front loaded, 7 years free of financial cost and 6 years extension if agreed mutually but free of financial cost.