Department of Energy reveals details of massive capacity payments to PSOs

• Five IPPs received capacity payments of more than 50% of fees in FY23.
• The government disbursed over 769 billion. Rs to 12 IPPs in FY 2023-24: document.
• A list of PSOs that produced electricity at the highest prices was published.

Days after the government approved “settlement agreements” with several independent power producers (IPPs) to reduce high electricity tariffs in the country, the Ministry of Energy presented details of the huge capacity payments to power companies over the past two fiscal years.

The Ministry of Power informed the Upper House that the federal government has entered into agreements with 180 IPPs and Rs 487 billion was paid in FY23 and a staggering Rs 923 billion in FY24 to a total of 36 IPPs in terms of capacity payments.

The details were presented during a question time session in the Senate on Thursday.

The documents, a copy of which is obtained from Geo Newssaid five IPPs had received capacity payments of more than 50% of their due payments in FY2022-23, costing the national exchequer Rs 188.824 billion.

The companies included China Power Hub Generation Company (Pvt) Ltd, Karot Power Company (Pvt) Limited, Mira Power Limited, Neelum Jhelum Hydropower Company (Pvt) Ltd and Star Hydro Power Limited.

In the financial year 2023-2024, the government disbursed Rs 769.409 billion to 12 IPPs, 50% more than their due payments.

The companies included China Power Hub Generation Company (Pvt) Ltd, Huaneng Shandong Ruyi Energy (Pvt) Ltd, Karot Power Company (Pvt) Limited, Lucky Electric Power Company Limited, Mira Power Limited, Neelum Jhelum Hydropower Company (Pvt) Ltd, Port Qasim Electric Power Company (Pvt) Limited, Star Hydro Power Limited, ThalNova Power Thar (Pvt) Ltd, Thar Coal Block-1 Power Generation Company (Pvt) Limited, Thar Energy Limited and The Hub Power Company Limited.

In addition, capacity payments were made to 14 PSOs, including 5 in 2023 and 9 in 2024 to power plants operating at only 10% capacity or remaining completely non-operational.

The IPPs, which received capacity payments in FY23, included Hub Power, Rousch Pak Power Ltd, Fauji Kabirwala Power Company Ltd, Altern Energy Ltd and Davis Energen (Pvt) Limited.

China Power Hub Generation Company (Pvt) Ltd, Port Qasim Electric Power Company (Pvt) Limited, Saba Power Company (Pvt) Ltd, Pak Gen Power Limited and others were included among those companies that received capacity payments.

In addition, the ministry also revealed data of the electricity companies that produced electricity at the highest and lowest prices in the country.

Pak Gen Power Limited topped the list of three IPPs that generated electricity at the highest price of Rs 36.21 per kilowatt (KW) followed by Rs 35.3 per KW from Fauji Kabirwala Power Company Ltd and Rs 34.72 per KW from Nishat Chunian Power Limited 34.72.

The IPPs that generated power at the lowest rates include Uch Power Ltd which generated per KW of electricity for Rs 3.1, Thar Coal Block-1 Rs 5.53 per KW and Engro Powergen Thar (Pvt) Ltd Rs 5.56 Rs per KW.

Two days ago, the federal cabinet gave the go-ahead to “settlement agreements” with bagasse-operated IPPs — a move the regime says will benefit the national exchequer by Rs238 billion.

The development came two months after the prime minister announced the early termination of power purchase agreements (PPAs) with the five older IPPs, with annual savings of Rs 60 billion or about Rs 411 billion over the remaining term of their contracts.

Last month, Federal Minister of Power Awais Leghari had revealed that negotiations are currently underway with 11 more IPPS to reduce electricity tariffs.

Briefing a meeting on the “Bijli Sahulat Package”, Laghari said the government has terminated power purchase agreements with five IPPs, a move expected to save billions of rupees in the economy by reducing capacity payments.

He claimed that Pakistan will no longer be among the countries that produce expensive electricity in the near future.

The federal government has come under huge pressure to review its deals with IPPs following a nationwide outcry as the addition of capacity payment charges swelled power bills beyond the affordability of the inflation-burdened masses.